Medline Q3 Earnings Call Highlights

Key Points

• Q3 revenue rose 10% to $7.9 billion and adjusted EBITDA increased 12% to $1 billion, with growth across Medline Brand and Supply Chain Solutions.
• Medline raised its 2026 organic sales growth outlook to 10%–10.5%, while keeping adjusted EBITDA guidance at $3.3 billion–$3.4 billion. For 2027, it expects high-single-digit sales growth but low-to-mid-single-digit adjusted EBITDA growth.
• Margins face inflation, operating-cost and customer-mix pressures; Medline estimates about $80 million of 2026 Middle East-related inflation impact and plans a larger-than-usual price increase in early 2027. It also authorized a $1 billion share repurchase program and expects restructuring savings to primarily begin in 2027.

Medline NASDAQ: MDLN reported third-quarter revenue growth of 10% year over year to $7.9 billion, supported by broad-based gains across its Medline Brand and Supply Chain Solutions businesses. Adjusted EBITDA increased 12% to $1 billion, while the company raised its full-year organic sales growth outlook for a third consecutive quarter.

Chief Executive Officer Jim Boyle said the company’s growth reflected execution across multiple channels, including new customer signings, expanding distribution capacity and continued progress in Canada. Medline remains on track to achieve its full-year target of $1 billion in new customer signings, he said.

“We executed well during the quarter, delivering strong, broad-based growth,” Boyle said. “We’re on track to achieve our total new customer signings goal, expand our distribution capacity, and advance our Global Quality Action Plan.”

Segment and Channel Growth

Medline Brand sales rose 7% to $3.6 billion during the quarter, with growth across all three product categories. Surgical Solutions revenue increased 8% to $1.7 billion, driven by surgical kitting and operating-room product demand. Front Line Care revenue rose 4% to $1.7 billion, aided by demand for exam gloves and personal care products.

Lab & Diagnostics sales increased 14% to $272 million, benefiting from existing-customer growth and new implementations. Chief Financial Officer Mike Drazin said multi-channel agreements signed during the year, including lab-related business, contributed to the performance.

Supply Chain Solutions revenue increased 14% to $4.2 billion, driven by new customer implementations and growth among existing customers. Drazin said the segment’s growth provides opportunities for customers to convert to Medline Brand products over time.

• U.S. acute-care sales increased 12% to $5.5 billion.
• U.S. non-acute-care sales rose 6% to $1.9 billion.
• International sales increased 8% to $518 million, led by volume growth in Canada and Europe.

Medline said its $2.4 billion of customer signings from 2025 have all been implemented. About 25% of that revenue was recognized in 2025, approximately 65% is expected to be recognized in 2026, and the balance is expected to flow into 2027.

Margins Face Inflation and Customer-Mix Pressures

Adjusted EBITDA margin increased 10 basis points to 12.2% in the third quarter. Results included an $81 million benefit from refunds of tariffs imposed under the International Emergency Economic Powers Act, along with associated customer repayments.

Excluding those benefits, Medline said higher sales volumes were partly offset by operating-cost increases, inflation-related cost of goods sold pressures and unfavorable mix. The company cited lower initial margins on new Prime Vendor relationships, acute-care channel mix and faster Supply Chain Solutions growth relative to the higher-margin Medline Brand business.

Supply Chain Solutions generated an adjusted EBITDA margin of 4.4% during the quarter. Drazin said Medline expects segment margins to remain in the “mid-fours” for the remainder of 2026, reflecting first-year rebates on new Prime Vendor agreements, customer renewals and higher operating expenses.

The company increased its estimated 2026 impact from Middle East-related inflation to about $80 million from a prior estimate of $70 million. Drazin said the amount includes higher diesel costs, freight expenses, raw materials and finished goods, with most of the impact coming from raw materials and finished goods.

Boyle said Medline plans to implement a larger-than-usual price increase early in the first quarter of 2027 to offset part of its sustained cost pressures. The company typically implements price adjustments on Jan. 1 and July 1, he said, and its contracts provide the ability to discuss pricing with customers. Boyle emphasized that pricing is intended to address cost inflation rather than serve as a growth lever.

Outlook Raised as Company Details 2027 Framework

Medline raised its 2026 organic sales growth outlook to 10% to 10.5%, from prior guidance of 9% to 10%. The company reaffirmed adjusted EBITDA guidance of $3.3 billion to $3.4 billion and expects to finish near the midpoint of that range.

The sales outlook includes $78 million of IEEPA tariff-related customer repayments that reduced sales during the first nine months. Adjusted EBITDA guidance does not include the benefit of IEEPA tariff refunds, including $324 million of net refunds received through the third quarter.

For 2027, Medline said it expects net sales growth in the high single digits and adjusted EBITDA growth in the low-to-mid-single digits. The preliminary framework assumes tariff rates remain at current levels and elevated diesel, raw-material and finished-goods costs continue through the year.

The company said it expects earnings growth to trail sales growth next year because it intends to continue investing in distribution capacity, automation and quality systems. Drazin said Medline expects adjusted EBITDA growth to return to at least the rate of sales growth in 2028, assuming no additional inflationary pressures from the Middle East or tariffs and no incremental increases in operations and quality investments.

Distribution, Quality and Capital Allocation Initiatives

Medline said its new Tracy, California distribution center is on track to open by year-end following the fire at its previous facility. The site will include the company’s largest AutoStore installation, designed to automate less-than-case picking and improve throughput and efficiency by mid-2027.

The company is also adding distribution capacity through a planned 1.2 million-square-foot Dallas-Fort Worth facility, a 1 million-square-foot Southern California facility and an 800,000-square-foot Michigan facility. Boyle said Medline expects it will need further distribution investments in coming years as its growth continues to exceed broader market growth.

Medline generated $1.8 billion in free cash flow during the first nine months of 2026. Cash and short-term investments totaled $3.6 billion, while net leverage declined to 2.5 times from 2.9 times in the prior quarter. The company made a $750 million term-loan prepayment in October.

Its board also authorized a $1 billion share repurchase program. Drazin said Medline intends to use the authorization opportunistically, including potential open-market purchases or purchases in a secondary offering, while maintaining its priorities of investing in the business, pursuing strategic bolt-on acquisitions and preserving balance-sheet strength.

Medline also said it recently launched a restructuring program expected to result in approximately $20 million to $30 million of costs in the fourth quarter, which will be excluded from adjusted EBITDA. The company expects the initiative to produce about $80 million to $90 million in annualized savings, primarily realized in 2027.

Meanwhile, Medline continues its Global Quality Action Plan, including independent assessments across more than 30 manufacturing sites, investments in people, processes and technology, and remediation of affected products. Boyle said the company does not expect the previously announced exit from its approximately $60 million home-care bed business to represent its broader product portfolio.

About Medline (NASDAQ:MDLN)

Medline Industries, Inc is a medical-supply manufacturer and distributor headquartered in Northfield, Illinois. The company provides products and supply-chain services to healthcare organizations, including hospitals, ambulatory surgery centers, physician offices, long-term care facilities, home health providers and other care settings.

Its product portfolio includes medical-surgical supplies, surgical and operating-room products, patient-care items, examination gloves, protective apparel, laboratory products, respiratory-care equipment, durable medical equipment and products for infection prevention.

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