Henry Schein, Inc. (HSIC) reported its Q3 results, which showed a mixed performance. The company's EPS and revenue were generally in line with expectations, but the guidance for FY23 was significantly lowered, citing a softening macro environment and a substantial business interruption impact from a previously announced cybersecurity incident.

HSIC's revenue grew by 3.1% to $3.16 billion, with the decline in sales of PPE products and COVID-19 test kits more than offset by growth in other areas. The company serves over 1 million customers, primarily office-based practitioners, including dentists and physicians in alternate care settings, as well as dental labs, urgent care centers, surgery centers, and dialysis centers.

Profitability was aided by HSIC's strategy of moving into higher-margin areas, such as technology and value-added services, including practice management services. Additionally, the company has a growing business in specialty dental products, such as implants, bone regeneration products, endodontics, and aligners. These higher-margin segments account for around 25% of sales and just under 40% of operating income.

The cybersecurity incident had a significant impact on HSIC's business, causing disruption to its distribution businesses and e-commerce platform. The company estimates the overall impact to EPS was $0.55-$0.75, excluding any future insurance claim recovery. However, HSIC has made progress in resuming its high levels of service and is initiating the reactivation of its e-commerce platform early this week.

Despite the challenges posed by the cybersecurity incident and the softening macro environment, HSIC believes it is benefiting from positive industry trends. The company noted that procedures are moving from the acute care environment to the physician office, ambulatory surgical center, and other alternate care settings. In dentistry, there is a growing understanding of the importance of oral care and the connection between oral care and overall health.

Investors reacted positively to the Q3 results and guidance, as the stock price increased following the release. The stock had pulled back sharply since the cybersecurity incident was disclosed in mid-October, but the certainty provided on the EPS impact and HSIC's encouraging update in terms of getting back to normal contributed to the positive sentiment.

While HSIC's Q3 performance was better than feared, the company still faces challenges in the form of the cybersecurity incident and the softening macro environment. However, HSIC's focus on higher-margin segments and positive industry trends should help the company navigate these challenges and continue to grow in the long term.

HSIC shares are up over 6% in midday trade following the premarket earnings release.