Henry Schein cyberattack may cut '23 sales 3%
Melville-based Henry Schein, Long Island's largest publicly traded company, suffered a cyberattack in October.
Credit: Tom Lambui
Henry Schein aims to fully restore its website Tuesday, about a month after discovering a cyberattack that executives expect to contribute to a drop of up to 3% in annual sales.
The dental and medical supplier released updated financial projections Monday, but said the full impact of the cyber incident would take time to emerge. Henry Schein's orders are back to 85% to 90% of the levels seen before a hack was identified on Oct. 14, chairman and CEO Stanley Bergman said during an earnings call with analysts.
The Melville-based company doesn't know yet how much recovering from the incident will cost or how it will impact sales in months to come. At this point, the cyberattack is the primary reason 2023 annual sales are expected to fall 1% to 3% below 2022 numbers, according to Ronald South, senior vice president and chief financial officer.
"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 might be to recover some of that business," he said.
Henry Schein has a $60 million cyber insurance policy, chief financial officer Ronald South said. Credit: Henry Schein, Inc.
Henry Schein, Long Island's largest publicly traded company, reported net income of $137 million or $1.05 per share in the third quarter, down from $150 million or $1.09 per share in the third quarter of 2022. Revenue for the quarter totaled $3.16 billion.
The finances of this period don't reflect the cyberattack, which occurred in the fourth quarter. Business interruption during that period will likely bring the stock price down 55 cents to 75 cents per share in the fourth quarter, South said.
After identifying the attack, Henry Schein quickly shut down online systems to contain the threat, Bergman said. The company used its backup data to operate while working with cybersecurity experts to bring back its digital presence online one element at a time.
A third party took a "significant" amount of information, and "bank account information for a limited number of suppliers was misused," Bergman said. He noted that Henry Schein addressed this and was continuing to investigate the cyberattack.
BlackCat, a cybercrime group, claimed responsibility for a ransomware attack on Henry Schein, cybersecurity experts previously told Newsday. Henry Schein wasn't asked during the earnings call about BlackCat or whether it had negotiated or paid a ransom to the group.
A Henry Schein spokesperson said the company cannot comment on an ongoing investigation, which includes law enforcement, when Newsday asked about BlackCat.
Typically, about 70% of Henry Schein orders are made electronically, Bergman said. When Schein's website wasn't operating, customers needed to place orders with sales representatives or by phone. Some of the smaller clients seem to have "held out," and now Henry Schein will need to assess whether they return, Bergman said.
Henry Schein's forecast numbers don't include expenses related to investigating and recovering from the cyberattack. They also don't take into account any payouts the company gets from its cyber insurance policy, which if authorized, could come in late 2024, South said. The policy has a post-tax $60 million claim limit after a $5 million retention fee, similar to a deductible.
Henry Schein shares closed Monday at $67.50, up more than 5%.
Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.
