Medline (NASDAQ:MDLN) reported first-quarter 2026 net sales of $7.4 billion, up 11% year over year, as the company began implementing a large cohort of new customer wins signed in 2025 and saw continued growth with existing customers. Management highlighted strength in its Supply Chain Solutions business and reiterated its focus on investing in automation and AI-driven supply chain tools, while navigating tariff-related costs and emerging inflationary pressures tied to Middle East-driven energy and raw material price changes.
Quarterly performance driven by implementations and share gains
CEO Jim Boyle said the company “started the year with 11% top-line growth in the first quarter,” calling it “one of our strongest quarters ever in Supply Chain Solutions.” He attributed the momentum to the implementation ramp of the $2.4 billion in new customer signings from 2025, as well as existing customer growth and another “strong quarter of new customer signings.” Boyle added that several wins displaced “long-tenured incumbents” and often spanned multiple channels.
Segment and channel results: Supply Chain Solutions leads growth
By segment, Drazin reported that Medline Brand generated $3.5 billion in net sales, up 6% year over year (or 8% adjusted for days). Supply Chain Solutions produced $3.9 billion, up 15% (or 17% adjusted for days), which Drazin said was supported by new customer implementations and existing customer growth.
Within Medline Brand, Drazin outlined performance by product category:
- Surgical Solutions: $1.6 billion, up 7%, led by surgical kitting.
- Front Line Care: $1.6 billion, up 6%, driven by demand in areas including exam gloves and personal care.
- Laboratory and Diagnostics: $293 million, up 1%, as double-digit core lab growth was offset by seasonally softer respiratory virus testing.
Drazin said management remained confident in laboratory and diagnostics growth expectations for the rest of the year, citing the volume of lab signings in 2025 and expected new signings in 2026. In response to an analyst question, he added that the core laboratory business grew in the “high teens,” while respiratory virus testing declined due to a weaker flu season versus last year.
By channel, Drazin reported:
- U.S. Acute Care: $5.1 billion, up 12%, driven by new prime vendor customers and same-store growth.
- U.S. Non-Acute: $1.7 billion, up 7%, with strength in post-acute, surgery centers, and physician offices (which was impacted by the softer respiratory season).
- International: $495 million, up 10%, due to foreign currency and volume growth in Canada and Europe.
Asked about utilization trends, Boyle said Medline did not see “much change in utilization” in the first quarter and described Medline’s growth acceleration as “share gains.” However, he said the company anticipates “some softening in the back half of the year” tied to reimbursement cuts and reduced access to insurance, while also noting that deferred care can translate into higher-acuity hospital visits.
Profitability pressured by tariffs and investments
Adjusted EBITDA was $776 million, down 11% year over year. Drazin said adjusted EBITDA margin declined 250 basis points to 11%, citing higher costs and continued investments, partially offset by higher volumes. He highlighted “an incremental $85 million related to tariffs” (and referenced a $120 million net tariff impact in the quarter), along with ongoing operational investments.
Segment profitability trends diverged:
- Medline Brand: Adjusted EBITDA margin fell 330 basis points to 22.1%, “primarily as a result of higher import costs due to tariffs.”
- Supply Chain Solutions: Adjusted EBITDA increased to $187 million, but margin declined 60 basis points to 4.8% due to “customer mix and operational costs to support customer demand.”
During Q&A, Drazin said Supply Chain Solutions EBITDA came in “a little bit behind our expectations,” pointing to margin mix from new implementations and ongoing investment in sales, operations, and IT.
Cash flow, leverage, and capital allocation
Medline generated free cash flow of $316 million in the first quarter. Drazin said the result was driven by net income excluding non-cash items and partially offset by higher receivables from sales growth, increased inventory, and capital spending. First-quarter CapEx was $96 million, including distribution center enhancements and automation and capacity expansion for Mexico kitting manufacturing.
The company ended the quarter with $2.2 billion in cash and cash equivalents and net leverage of 3.1x. In response to questions about capital priorities, Boyle said Medline’s first priority is to invest in the business, while also leaning into M&A “when we see the right opportunity.” If opportunities do not materialize, he said the company would use capital to further reduce leverage over time.
Guidance raised on sales; EBITDA outlook maintained amid tariffs and Middle East-related costs
Based on first-quarter performance, Drazin said Medline raised full-year 2026 organic sales growth guidance to 8.5% to 9.5%, up from 8% to 9%. The company maintained its full-year adjusted EBITDA guidance of $3.5 billion to $3.6 billion.
Drazin said the EBITDA outlook reflects expected benefits from a lower tariff rate offset by continued investments and potential headwinds from rising oil prices tied to conflict in the Middle East. He noted Medline’s direct sales exposure to the region is “de minimis,” but the company faces input cost exposure through fuel and petroleum-linked raw materials. Drazin estimated fuel-related spending at about 50 basis points of total cost of goods and said the company expects a larger but “overall immaterial” impact in the second quarter if diesel remains above $5 per gallon. He also said supplier increases tied to petroleum-based products, including nitrile exam gloves, resins, and plastics, could take effect in the P&L in late Q2 or early Q3 due to inventory levels.
On tariffs, Drazin said Medline is assuming the current 10% tariff rate expires mid-year and returns to higher levels seen prior to the Supreme Court IEEPA decision. Later in the call, he clarified that the company expects rates to revert to pre-ruling levels around August, noting that Section 122 measures run out after 150 days in late July and that policymakers may use Section 232 or 301 authorities to recreate prior rates.
When asked about pricing actions, Drazin said Medline had not yet determined whether it would raise prices related to Middle East-linked inflation. He said that during prior tariff actions, Medline typically provided customers with 45 to 60 days’ notice before price increases and had previously chosen to absorb costs for a period to evaluate conditions.
Beyond near-term financial performance, Boyle highlighted several strategic initiatives, including a first prime vendor partnership in Canada with Mohawk Medbuy Corporation, a Symbotic partnership to pilot AI-powered robotics in Medline’s Ohio distribution center next year, automation enhancements such as Pick Pack Pro in Montgomery, N.Y., and continued rollout of “Mpower,” an AI-enabled supply chain control tower built with Microsoft. Boyle said Medline expanded the Mpower pilot to 10 customers in the quarter and aims to offer it to most acute care customers by year-end.
About Medline (NASDAQ:MDLN)
Medline (NASDAQ: MDLN) is a healthcare products and services company that manufactures, sources and distributes a wide range of medical supplies and equipment for healthcare providers. Its product portfolio spans clinical consumables and personal protective equipment, surgical and procedural supplies, wound care and incontinence products, diagnostic and laboratory supplies, and select durable medical equipment. Medline supports care settings that include hospitals, health systems, long-term care facilities, ambulatory clinics and home health providers.
In addition to product manufacturing and distribution, Medline provides supply‑chain and logistics services designed to help healthcare customers manage inventory, reduce costs and streamline operations.
