Good morning, ladies and gentlemen, and welcome to Henry Schein's Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. And I would now like to introduce your host for today's call, Graham Stanley, Henry Schein's Vice President of Investor Relations and Strategic Financial Project Officer. Thank you. Please go ahead, Graham.

Thank you, operator, and my thanks to each of you for joining us to discuss Henry Schein's financial results for the third quarter 2023. With me on today's call are Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein; and Ron South, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to state that certain comments made during this call will include information that is forward-looking. As you know, risks and uncertainties involved in the company's business may affect the matters referred to in forward-looking statements. As a result, the company's performance may materially differ from those expressed in or indicated by such statements. These forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein's filings with the Securities and Exchange Commission and included in the Risk Factors section of those filings. In addition, all comments about the markets we serve, including end market growth rates and market share, are based on the company's internal analysis and estimates. Today's remarks will include both GAAP and non-GAAP financial results. We believe the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable the comparison of financial results between periods where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and can be found in the Financials and Filings section of our Investor Relations website under the Supplemental Information heading. For additional financial information, please refer to our quarterly earnings presentation also posted on our Investor Relations website. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 13, 2023. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Lastly, during today's Q&A session, please limit yourself to single question and a follow up. And with that, I'd like to turn the call over to Stanley Bergman.

Thank you, Graham. Good morning, everyone, and thank you for joining us. Before reviewing our third quarter performance, I'd like to update investors on the cybersecurity incident that were discovered on Saturday, October 14, primarily affecting some of our distribution businesses. That morning, we initiated our business continuity plan when we promptly took precautionary actions, including taking certain systems off-line and other steps intended to contain the incident, which led to temporary disruption of some of our operations. The following week, our distribution centers were processing orders with temporary interim processes and were generally delivering orders to customers within one to two business days. In accordance with our business continuity plan, we activated a previously identified team of leading cybersecurity experts to assist in the investigation and recovery of the systems and to advise us through the recovery process. Over the past weeks, we have worked to create a clean network in a controlled manner from the backup data we maintained. Our distribution businesses are now operational and we are initiating our e-commerce platform early this week, and we're indeed hopeful that the website will come up tomorrow morning. We've also made significant progress resuming the high levels of service our customers expect from us. Over the last week, orders from our distribution businesses were approximately 85% to 90% of what they were pre-incident. We expect orders to increase with the reactivation of our e-commerce platform. Of course, our field sales consultants and telesales representatives have deep relationships with our customers, and our complementary software and other value-added services bring value that we believe continues to make us the best choice for our customers in the areas of services we provide. As a reminder, this incident mostly affected the operations of our North American and European dental and medical distribution…

Very good. Thank you, Stanley, and good morning, everyone. As you may have seen on November 2, we filed a notification with the SEC advising that we will not be filing our Q3 Form 10-Q until later in November. This delay is related to our recent cybersecurity incident. We were able to complete our consolidated income statement prior to deactivating our systems. However, we have been delayed in completing our consolidated balance sheet and statement of cash flows, which we normally include as attachments to our earnings release. These statements will be available when our Q3 Form 10-Q is completed. The third quarter non-GAAP financial results for 2023 and 2022 exclude integration and restructuring costs and amortization expense of acquired intangible assets. This is detailed in Exhibit B of today's press release. Note that there are no effects of the cybersecurity incident on our Q3 results as the incident occurred in October. With respect to sales growth in the quarter, I will focus primarily on LCI sales growth, which is internally generated sales in local currencies compared with the prior year and excludes acquisitions. Third quarter global sales of $3.2 billion reflected an LCI sales decrease of 1.2%. However, when excluding sales of PPE products and COVID-19 test kits, our LCI sales grew 1.1%. We sold $131 million of PPE products in the third quarter of this year, a decrease of approximately 19% year-over-year. And we sold $44 million in COVID-19 test kits, a decrease of approximately 46% year-over-year. Our GAAP operating margin for the third quarter of 2023 was 6.3%, a 52-basis point decline compared to the prior year GAAP operating margin. On a non-GAAP basis, operating margin for Q3 was 8.1%, a 12-basis point decline compared to the prior year non-GAAP operating margin with higher gross profit margins…

Thank you, Ron. I appreciate that. Operator, we are ready to take any questions that investors may have.

Thank you, sir. We will now be conducting a question-and-answer session. [Operator Instructions] And the first question comes from the line of Jon Block with Stifel. Please proceed with your question.

Hey, guys. Good morning. Thanks for taking questions. Maybe the first one, just high level. Stan, what are you guys hearing from the customers? The ordering frequency from a practice might be, I don't know, maybe roughly every two to three weeks. So some customers might have encountered the issues pretty minimal number of times, maybe one time, possibly twice at most. What have you guys heard regarding, call it, customer retention? Or do you think you don't have a better feel for that until the actual website is back up and running, which seems, to your prior point, tomorrow morning? And then I'll just ask a follow-up.

Yes. So Jon, that of course is a very important question. We believe we are at this 85% to 90% floor. The larger customers that are more sophisticated from an IT point of view are buying -- using either the e-commerce systems that we offer or workarounds. I would say that is even with the smaller customers -- the midsized customers. The smaller customers are relying on visits from the field sales consultants to collect the orders, or they were until recently, and from the telesales reps. So the funnel for doing that is not as wide as of course, digital ordering. So I think we will start seeing much more business from the smaller customers, which are a key part of our business as the website returns. But we have very good relationships with our customers, the field sales consultants, tremendous telesales connectivity and, of course, the value-added services. Generally, we've not heard of customers leaving us. Have customers made alternative decisions? Yeah, of course. Some of the buyers of pharmaceuticals couldn't wait, for example, for controlled drugs. We expect our controlled drug system to be up relatively soon. So I would say, generally, we are heartened by the support we've received from our customers. Jon, as you know, unfortunately, cyber issues in health care have been quite prevalent. In fact, the first six months of this year, there were over 300 incidents in health care alone. So the customer base is quite attuned to this. And obviously, it's going to be a lot of work on behalf of our field sales representatives and our telesales people as well as our e-commerce team to bring all the customers back. There will be some trailing, I would imagine. But overall, we remain quite enthusiastic about the level of support we receive. And by the way, not only from our customers, but the entire industry has been very, very supportive of us.

That's great color. Thanks, Stanley for that. And maybe I'll pivot, Ron, to you for the second question. Any really high-level thoughts around 2024? And not a specific number, but just maybe just the construct. Should we think about it as sort of growth on the core underlying EPS of $5.22, the revised midpoint, and then offset by, call it, the lag hit on the cybersecurity incident? And on that second point, I just want to make sure, the $0.55 to $0.75 4Q '23 cyber hit, that's all, call it, decremental low sales? I think you said no expenses in there. That would be excluded from non-GAAP. Is there any promotional stuff in there? Sorry, and last sort of question, tack-on, how do we think about the exit impact for December? Because you talked about the top-line impact for the quarter, but obviously December would likely be much lower than what you've experienced in October. So any color on the cadence for the trailing throughout the fourth quarter. Thanks, guys.

Yeah. Thanks, Jon. Yes, you're correct in that the $0.55 to $0.75 that we've called out as Q4 impact is attributable to business interruption impact. It does not include the onetime cost that we are incurring that are directly attributable to reactivating the systems. And right now, it's our intent that when we report the Q4 results, we'll be calling out those particular costs as part of our non-GAAP reconciliation. In terms of run-rate into '24, that will be something that really is largely contingent on the level of business that we see with One web being back up. That is a very important turning point for us. It's something we're very excited about in the organization this week. And I think that we'll have greater intelligence in terms of what's happening with customer retention with One web back up. I do anticipate we will likely have some, whatever you want to call them, customer retention programs or promotions in the quarter that may put a little bit of pressure on I4 margins. I wouldn't expect it to be real significant. But having said that, we do want to show some appreciation to our customers, and we do want to ensure that we go into 2024 with a solid of a base of businesses that we can possibly have.

And the next question comes from the line of Elizabeth Anderson with Evercore ISI. Please proceed with your question.

Hi, guys. Thanks so much for the question. So as we think about the cybersecurity, you said the website's back up tomorrow, that's great to hear. Now if we think about just sort of like the broader operations that support that, is that something that you feel like is also kind of in a similar place? And obviously, you probably wouldn't put the website up if you're having a ton of internal issues. So I just want to make sure how you feel about sort of the rest of the systems that are supporting that ordering process. And then sort of as we think about 2024, you obviously have the BOLD initiative. I just wanted to see if given the cybersecurity situation or the current demand environment, how do you sort of think about that conceptually, whether there are places there you can accelerate cost cuts. Any color there would be helpful. Thank you.

Thank you, Elizabeth. Again also two very, very good questions. So let me just provide one more time the context which, I think, we tried to communicate our prepared remarks. So we experienced the cybersecurity incident, we got suspicious. And what we did was -- and our CTO made a brilliant move, he brought the whole system down immediately. He knew -- he was quite comfortable that our backups were good. So our backups have turned out to be very good. And what we need to do now is turn on application by application. Before you can turn on that application, you have to do certain forensic work to make sure that there are no sleepers in there. And so that's what we've been doing. I would say that at the moment, other than the website, we're more or less back to where we were. There are a few areas that require additional turning on, some involving invoicing, some involving the returns function. And the only area we can't really supply right now because we're super cautious is on controlled drugs, although we have an affiliate that was not impacted and they are shipping controlled drugs if need be. We expect all of these areas, and this is expect, to be up and running this week. There are some isolated areas where we have challenges. I would say they have less to do with the customer side. We have some parts of the world where we have WMS systems that are not fully functional yet. It's not impacting the customer because the E3 system, the basic buying system is working, has been working for a while. But it's just taking us a lot more human capital, human resources in receiving the products, putting them away, and picking. Those areas will come back, I think, in the next few weeks. So I think from a customer point of view, we're in pretty reasonable shape today. Yeah, if a customer has an inquiry on certain purchases made some time ago, we may not be able to give an instant response. We may have to do some research through the backups. But in general, operationally, actually we were doing quite well a couple of days after -- two days after the cyber incident. The key here is to remember that our backups are in pretty good shape, and we feel very confident in the way we're bringing up these systems one at a time. Our team on the IT side is remarkable, our investor -- our consults are just the best. And we feel pretty good that we are bringing up systems that are stable, and we just have to go through the cycle. But I don't think we're talking about that long. But I'm not sure -- but I'm quite sure that from a customer point of view, other than the items I mentioned, we'll be in pretty good shape tomorrow hopefully when the website comes up.

Elizabeth, I'll take the second half of your question. I believe you were asking if in 2024, did I anticipate we would be accelerating any cost cuts. Did I understand you properly?

Yeah. That's what I was asking. Thank you.

Yeah. I think that we will really go about our business in 2024 as we had originally planned. As we said on the call, we have $1 billion committed to acquisitions, and typically in the year -- in the short-term following acquisitions, we look for synergy opportunities. Some of those acquisitions will stand alone as businesses, but others do provide us with some synergy opportunities that we'll be able to implement over the course of '24 and then just any other normal process that we would go through to identify cost efficiency. So I don't think this -- in the context of the cybersecurity incident, do we feel a need to go out and accelerate any type of cost savings in '24?

Got it, thanks so much.

You're welcome.

The next question comes from the line of Jeff Johnson with Baird. Please proceed with your question.

Thank you. Good morning, guys. Can you hear me okay?

Yeah, Jeff.

Great. Thanks for taking the call so are the questions. So let me ask two questions. I guess they're both kind of intertwined, but just so kind of we level set all of us on how to conceptually think about your outlook from here. First, if we could just ignore the cyber for a second, and I'm sure that's not possible, and that will be my follow-up question. But if we ignore that for a second. Third quarter dental organic growth, right around flattish levels on a global basis, the company-wide 1%-ish. Would those -- if you were counseling us on how to think about kind of our 2024 models, would those be starting off points that you would recommend we think about conceptually and where we build kind of our organic ex cyber kind of growth rates into next year?

So Jeff, obviously, we've provided a lot of thoughts around this, as have analysts and as the industry. So in broad terms, we believe our business is relatively recession-resilient. It goes down a bit, it will come back. Our North American dental consumable business, as you correctly point out, had flat internal growth. We saw moderate softness in patient traffic in North America due to appointment cancellations, mostly in September. It's hard to tell how long that has continued. It was similar in the first two weeks of October. But thereafter, obviously, because of the cyber incident, it's hard to project. If you look at -- I'm talking about North America now, sales of traditional dental equipment have been largely reverted to the pre-pandemic levels. And we think that's growth in the mid-single digits. Digital equipment sales continued to be impacted by lower average selling prices and it's hard to again give you an absolute as to when we expect this to normalize. My sense is, and that's what our equipment people say, it will normalize sometime in the first quarter of next year. If you look at our international business, overall, volumes of consumer build merchandise held steady across most regions. If you project that into the international equipment sales, there is a slowdown in large equipment in parts of the world. But there are also some unique reasoning for that in places -- for example, in places like Australia, there was a tax incentive that ended. So yeah, I think there is some caution amongst our customers in parts of the world because of the macroeconomic issue in parts of Europe. I don't think it's necessarily bad in any one country. Overall speaking, I think health insurance is, in the U.S. typically provided through employment could be a…

Yeah. That's helpful. Thank you, Stanley. And so that kind of helps maybe level set us on the core assumptions. Ron, just my follow up then is, as I see it, and correct me if I'm wrong, there's three variables on the cyber that we need to think about heading into next year. Do you continue to run any kind of customer retention programs on the spending side? Do you have any kind of just higher core spending on cybersecurity that you've got to put in place here that you have to put in place that's going to structurally take the OpEx side higher? And then three, is there any kind of customer loss? Do you lose maybe 1% or 2% of revenue or something like that? Because not everybody comes back either for risk-mitigating reasons or other reasons. So just any comment on kind of the two spending categories. Will those be higher next year? And the customer retention, I know it's hard to predict, but would it be safe to build in maybe just a little bit of bleed away of customer? Or do you think you get pretty much most of that back in? Thank you.

Sure, Jeff. I think I'll kind of address the first item around customer retention and the third item of customer loss somewhat together. And I think we will have a greater feel for that in the coming weeks. The -- as I was saying earlier, the restoration of -- or the reactivation of our website will bring us much more intelligence in terms of what that customer retention and what the potential for customer loss might be, and as a result, what the necessary investment may be to recover some of that business and some of those customers. And that will be taken into consideration when we communicate our 2024 guidance in February of next year. I think in terms of higher cyber spend, like everything else, we'll assess where we think is -- what is the appropriate investment if we believe it's necessary relative to anything else, we will do that. But I think right now, we're still in the midst of understanding the cause of this. The forensic investigation is ongoing. And we will invest accordingly according to that, if necessary. If it's necessary to increase that investment, we will.

Thank you. And the next question comes from the line of John Stansel with JPMorgan. Please proceed with your question.

Good morning, guys. Thanks for taking my question. I just want to talk about some of the swing factors that could move you from the $0.55 to $0.75 in the cybersecurity headwind. What are some of the factors that you could see? Is it really just a time to ramp back up to 100% of like pre-incident levels? Or is there anything else built in there that we should be thinking about as we look at that?

Yeah, John, I would say there's really two primary things, one being the absolute volumes of customers that -- we have some customers who only use the website to order. And while the website is down, they're not ordering. And now that the website is up, we expect a significant percentage of those customers to return. To the extent that we have to -- that we want to provide incentives to those customers. And that kind of leads us to the second factor that we've taken into consideration, and that is the margins, to the extent we have some discounting in the quarter that would show up in the gross margins. So I think those are the areas that really are impacting our models in terms of what we believe the Q4 impact will be. We've run multiple scenarios and we've really kind of have triangulated to that $0.55 to $0.75 at this point. We'll gain much more intelligence over the coming weeks -- with the website associated with that.

Great. And then just on the kind of the 85% to 90% of pre-incident volumes, can you give us kind of a sense qualitatively of how that's trended since that, I think, the 24th and onwards when you were generally operational? Has that kind of increased week-over-week? Has that been kind of static? And then, I guess, you kind of indicated there that a big portion of this may just be people who prefer to use the online portal. Is that how you're thinking about the remaining customers who kind of haven't been ordering with you?

Yeah. So we're -- we've operated four weeks since we deactivated the system. Obviously, the most significant impact was that we've won. We saw a significant improvement in week two. That led into improvement in week three. And I would say week four was consistent with week three in terms of the volumes that we were processing. I do think there is a ceiling on that 85 to 90 where we are now that we can get through with One web up. And that will be -- like I was saying earlier, that's the intelligence we need to gather over the next couple of weeks when we see which customers have returned to us to close that 85 to 90 to get it to 100. So that's really where we're operating right now.

Just to add to Ron's comment, for a period of time, the only way our customers' good order with us was through a field sales representative or through telesales. A huge percentage of our orders, something like 70% of our orders, come digitally. That's the good news. We trained our customers that the best way to do business is digitally. The challenge is that 70% of orders had to go through our field representatives and telesales. That funnel was not large enough for a few weeks. So customers couldn't -- not all customers could buy through us. As we expanded our digital ordering capability, as our field sales people got more efficient ways in which to into the orders and we have incredible work around that came up very quickly, but for a period of time they were not there. And the telesales team had limited capacity. Of course, we were able to expand the telesales team's capacity. We had a model in place. We have a procedure in place that actually was tested during COVID, and literally overnight, we expanded the capacity. The challenge was the funnels for a few days were not big enough to accept all the orders. So now we can accept the orders. It will be much more efficient with direct customer entry through the website, and we expect that is going to result in customers coming back who had to maybe go elsewhere for urgent products. But I think a number of our customers, specifically some of the smaller ones held out. And I think they will come back and give us the orders that maybe they were holding on to. But it's going to take some time through the end of the fourth quarter for us to ensure that our systems are back to normal and in terms of the customers' thinking

Thank you. And our next question comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question.

Hey, thanks for taking questions. Sorry for the background noise. [Indiscernible] here. I wanted to ask, of the 85% to 90% that you're talking about, Stan and Ron, are there certain categories that have been slower to come back or certain geographies, maybe bifurcate North America versus Europe or dental versus medical, just anything there. And then I have a follow-up.

I would say on balance, it's spread out reasonably. There are parts of the world where electronic ordering is not as large as, say, in the United States. So those customers have been more comfortable ordering through telesales representatives or field sales representatives. But it's more or less okay. Actually, on average, Europe is a little bit higher but then actually don't have all the systems we have in the U.S. So I don't think you can read anything into that. This is a period when we started out with minimal systems on first day. And by the end of the third day, we had a lot of systems working. And then as the month went by, more and more systems came up. So it's been a period of the customers adjusting to what's available, some places that may be adjusted faster than others. But I don't think we can read anything in the first month of this incident, anything specific. And some products are more elective than others, aesthetic products or maybe products relating to like toothbrushes, et cetera. They're not necessarily that urgent. So we'll see how this materializes. But I don't think, Jason, I wish we could give you some conclusive information. But there's too many puts and takes here to understand exactly whether these trends are related to particular products or regions. Let me remind you that our equipment business was operational throughout this period, did not have full support of systems. But mainly for customer needing service, they've got it. Not all the equipment orders that we received are being installed right now. There will be a catch-up in the next couple of months. We went into the period with a pretty decent backlog of equipment, partially driven by the very successful [Indiscernible]. So not all of that has been shipped as fast as we would have wanted to, not because we don't have the ability to install new equipment but simply because it's just a bit more inefficient given the fact that certain of our equipment systems were not running and we're relying on a lot of manual systems.

That's really helpful. Thanks for that color. And then as you think about -- I think a lot of you trying to tease out the exit rate renewal what things look like in 2024. Out of that 10% to 15% where you're still operating the low pre-cyberattack levels, any sense of like of that 10% to 15%, how many of those customers are under contract like large accounts within dental or medical or have your practice management software in the elements that would make it more sticky and really, I think, exemplify how value industry reattain a lot of the business that you expect you will. Thank you.

Yeah, Jason, I think that we do have -- our larger customers have really stuck with us through this, which we're very appreciative of that. And so we don't expect any significant attrition there. The 85% to 90% on the ordering, like I said before and as Stanley added, these are -- a lot of these are customers who are -- don't rely on FSCs, don't rely on our sales reps on the dental side. And so I think that's really the run rate that we'll be looking to improve as we go into '24, and we'll be able to reflect whatever our assumption there is in our '24 guidance when we provide that.

And our next question comes from the line of Nathan Rich with Goldman Sachs. Please proceed with your question.

Great. Thanks very much for the questions. I just wanted to follow up there on the cybersecurity incident. Have you had any issues with getting supplier product? I recall you mentioned something in the prepared remarks about some supplier accounts. Just wondering if that's had any impact on inventory. And from a balance sheet perspective, would you expect any impact on inventory levels in the near term or capital deployment in the near term just as you work through these issues?

Yes, I think this is a good question, Nathan. We did not have E3 operating for -- I can't remember when it was, the first week. So we were buying based on historical data of about a month or so old. That system came up pretty quickly. There was some challenges in the receiving department because we didn't have the full software stored on the receiving side. But I would say other than maybe one or two actually suppliers that had concerns about corrupting their systems, we're back electronically ordering, even those of, I think, one that I was involved with quickly removed any concern they had. And we've been buying product in an orderly way. I would say that on some manufacturers, we went into the quarter with very good inventory for multiple reasons. But essentially, our suppliers have been very helpful. We've gotten the product we need. We may have slightly increased inventories in certain areas. But Ron can address the balance sheet, per se. But essentially, I have to say the support we've gotten from our manufacturers has been truly remarkable. Some that helped us with drop shipments maybe in the first week or two. We felt we wanted to lighten up our load in our warehouses, but it wasn't needed. We just took that as a precaution.

Yeah. Nathan, just to add to Stanley's remarks, I don't expect this to have a significant impact on our inventory levels. The one area we could see a little bit of impact, and we've baked some assumptions into our Q4 guidance on this, is the -- it could reduce our rebates a little bit because our rebates are largely -- are primarily now, especially in North America, our sellout rebates as opposed to purchasing rebates. So to the extent that we do not recover some of the sales in the fourth quarter could impact our rebates in the fourth quarter. In terms of capital deployment, I don't really see any change. The balance sheet is strong, remains strong going into this incident and strong coming out of the incident. I don't see any significant changes in how we're deploying capital as a result of this.

Great. And if I could just follow up quickly, I think it was Jeff's question earlier, just on the outlook for the dental business. I think the revised revenue range didn't really incorporate a significant impact from the macro environment. And I guess I'm just wondering if we should interpret this as the variability that you saw, whether it was patient traffic or equipment sales in certain international markets just hasn't been significant enough to kind of change your view of the overall trajectory of the end market at this point.

Yeah. Nathan, I think if you think back to our Investor Day last February, for example, our dental assumption then was, say, in the 2% to 4% range in terms of long-term growth. I think it's probably fair to say we're trending closer to the lower end of that range. And I think that in terms of dental specialties which is included within our dental merchandise numbers that we provide, as we mentioned in the prepared remarks, there have been some -- there is some softness in the end markets on implants that I think is probably pushing some of that dental specialty growth that we would like to get more towards the lower end of that range as well. So I would suspect as we get -- as we sit down and try to finalize our 2024 numbers, while we still feel good in the long term about those growth trends, we could see '24 trading to something that would be more towards the lower end of that range.

We have time for one last question coming from the line of Kevin Caliendo with UBS. Please proceed with your question.

Thanks for taking my question. And I appreciate it. How much -- prior to the cyberattack, how much of your revenues typically went through the e-commerce platform, just broadly speaking? I'm guessing it was more than 10% to 15%, right?

Yeah, much more.

Absolutely. Absolutely, Kevin. So if you take EDI plus the web combined, so essentially electronics type of ordering, it's in the 70% to 75% range. Well, I think the 85% to 90% on the orders we're talking about, kind of that missing 10% to 15%, we think, is largely attributable to customers who exclusively ordered electronically and did not have a rep. They didn't want a rep. They perhaps use multiple distributors. And so because they didn't have a rep who could assure that they were getting the product that they wanted, they simply ordered from someone else. So I think that's the question, is how much of that business can we get back. That's what we're working to get back.

Okay. That's helpful. I just wanted to understand the bend Venn diagram here, who we were talking about.

Yeah. A lot of those others were able to, through their rep or otherwise, we're able to place orders through our telesales channel, or their rep was able to make sure that their order got put in accurately and completely.

And I appreciate the commentary around the lower end. That even sounds better than many of your peers have spoken publicly on the trends that they're seeing in October and November for the fourth quarter. What -- I sort of want to ask Stanley this question, just big picture. What do you think is actually driving the slowdown in demand in dental, even if you guys aren't seeing it as acutely as maybe some of the others probably because of mix, probably because of your own positioning? But how often have you seen this kind of macro environment, how long do you think it lasts? What do you think is causing at this time? Just love to hear your take on that and how long do you think it lasts for.

Yeah. Certainly good questions here today. The third quarter, September in the U.S., we saw sales of consumables going down. There's patient data from the ADA, but it's very hard to pinpoint this exactly, how much of that amount going down was because of a switch to maybe some generics a little bit, how much was the result of price resistance because prices have gone up. There's a little bit of that in there, too. How much was because of flu and COVID. We're not talking about many hundreds of basis points. We're at the margin, yeah. And to conclude anything from September and the first two weeks of October is very hard for us to pinpoint a clear direction. What we've seen in the past is the sales of consumables may go down for quarters, but doesn't last much longer than that. And it's a strange recession. It seems like, on the one hand, the consumer is resisting. On the other hand, retail sales don't seem like a disaster. I mean, they've not been great. But I think we're talking about at the margin. In Europe, there is government support. So it's not going to be as elastic. But there is a little bit of concern with the geopolitical environment. Although when we look at Germany, it's not terrible. I would say there's been on the equipment side some resistant to the resistance to more expensive equipment and there's been a switch to less expensive equipment. It doesn't really impact that much -- have such a huge impact on us. The gross profit may be a little bit less. But generally, there are so many other variables on the equipment side that I can't say for sure that the trends in Europe on equipment are going to significantly impact…

Mid-February.

Mid-February. And I think our filings with the SEC, although a little -- an aspect of it has been delayed for a few weeks, it will be on time. And thank you very much for your patience.

And ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.