Medline Inc.

Second-quarter net sales increased 12% year over year to $7.7 billion; first-half net sales were $15 billion, up 11%. Medline Brand second-quarter net sales were $3.5 billion, up 7%, and Supply Chain Solutions net sales were $4.1 billion, up 16%. Adjusted EBITDA was $1.1 billion, up 13% year over year, with adjusted EBITDA margin at 13.8%, up 20 basis points. The quarter included a $243 million net benefit from IEEPA tariff refunds, and the Tracy fire reduced net income by $336 million. For 2026, management raised organic sales guidance to 9% to 10% and lowered adjusted EBITDA guidance to $3.3 billion to $3.4 billion; net tariff impacts are now estimated at approximately $350 million, CapEx was raised to $500 million to $600 million, and tax distributions were narrowed to $250 million to $300 million.

Jim Boyle framed the quarter as evidence of broad-based commercial momentum, emphasizing strong demand, new customer wins and the strategic value of Supply Chain Solutions in converting customers to higher-margin Medline Brand products. He stressed that the company is investing ahead of growth in distribution, manufacturing, quality and staffing, even though those actions are pressuring near-term margins. His tone was confident but candid, saying Medline is “not satisfied” with current margin challenges while remaining highly positive on long-term growth opportunities and share gains.

Mike Drazin walked through the quarter’s numbers and the updated outlook, highlighting 12% reported revenue growth, 13% adjusted EBITDA growth, a 13.8% margin and $920 million of free cash flow in the first six months. He said cash and cash equivalents were $2.3 billion, short-term investments were $350 million, and net leverage fell to 2.9x, which he described as reaching the company’s long-term goal of below 3x. On guidance, he explained that the EBITDA cut reflects $70 million of expected Middle East-related impact, Tracy fire costs, growth investments, quality remediation and retail softness, while also noting 2026 net tariff impacts of about $350 million, an assumed roughly half-transitory/half-permanent cost burden, and a full-year Supply Chain Solutions margin expectation of around 4.9% to 5%.

Analysts focused on what the company’s new cost base means for 2027, how much of the EBITDA pressure is transitory versus permanent, and whether the latest spending on operations and quality is simply the new normal. Management said about half of the cost impact is transitory and half is permanent, with Middle East and Tracy costs expected to fade over time, while operational and quality investments are more likely to remain in the base. Questions also centered on the $89 million tariff repayment, which management said is accrued and expected to be paid to customers later this year, and on retail weakness, which management said was Medline-specific and linked to losing part of a customer due to sales execution rather than a broad market issue.