Why did net income and Adjusted EBITDA decline despite strong sales growth?

Sales growth was offset by a 250-basis-point gross margin decline, driven by higher cost of goods sold including tariff impacts, plus higher operating expenses to support new customer onboarding. Net income was also affected by a one-time employee bonus tied to the IPO, which was included in transaction-related costs of $35 million. Lower interest expense ($136 million vs. $210 million) partially offset these pressures.

Why did the company raise its Organic Sales guidance but keep Adjusted EBITDA guidance unchanged?

Management cited strong momentum from existing customer growth, implementation execution at scale, and new customer wins, which supports a higher revenue outlook. Maintaining the $3.5-$3.6 billion Adjusted EBITDA range implies that margin pressure from tariffs, cost of goods, and continued investments in people, infrastructure, and capabilities is expected to persist over the remainder of the year.

What is the difference between GAAP and adjusted earnings per share?

GAAP diluted EPS was $0.16 based on $129 million attributable to Medline Inc. and 825 million diluted Class A shares. Adjusted Diluted EPS was $0.33, calculated on Adjusted Net Income of $433 million and about 1.32 billion adjusted weighted-average shares. The adjusted figure assumes full exchange of noncontrolling Class B units into Class A shares and excludes intangible amortization, stock-based compensation, inventory adjustments, and transaction costs, net of tax.

Why did free cash flow decline so sharply?

Operating cash flow fell $270 million year over year to $412 million, mainly due to a $141 million increase in trade receivables tied to sales growth and higher inventories ($4.8 billion versus $4.8 billion at year-end, with build primarily in working capital). Capital expenditures were stable at $96 million, related to distribution center automation and kitting facility investments, so the decline was primarily operating-driven.

What are the key balance sheet and dilution considerations for investors?

Medline had $12.8 billion in total debt and $2.2 billion in cash, producing net leverage of 3.1x Adjusted EBITDA. The tax receivable agreement liability rose to $4.0 billion, which represents future cash obligations to pre-IPO owners. Noncontrolling interests remain substantial at $8.1 billion of equity, and the share count rose, with Class A shares increasing to 846 million from 812 million, reflecting the continued exchange of Class B units.

MDLN 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 6, 2026. Cited figures are marked; the original filing is the authoritative source.

Medline Inc. (Nasdaq: MDLN) reported first quarter 2026 results for the period ended March 28, 2026, showing top-line growth alongside meaningful margin and earnings compression.

Net sales rose 10.7% to $7.4 billion^a (Organic Sales +10.1%), driven by implementation of 2025 new customer signings and growth with existing customers. However, net income fell 25.8% to $239 million, Adjusted EBITDA declined 10.6% to $776 million, and gross margin contracted roughly 250 basis points to 25.0%, reflecting higher cost of goods sold including tariffs, elevated operating expenses to support new customer growth, and a one-time employee bonus tied to the IPO. Adjusted Diluted EPS was $0.33 versus GAAP diluted EPS of $0.16.

Cash generation was softer: operating cash flow fell 39.6% to $412 million^b and Free Cash Flow declined 45.9% to $316 million, largely due to working capital build from higher trade receivables and inventories. Net leverage stood at 3.1x Adjusted EBITDA, with cash of $2.2 billion on the balance sheet. Notably, net income attributable to noncontrolling interests was $110 million of the $239 million total, reflecting the company's Up-C structure, and the tax receivable agreement liability rose to $4.0 billion.

Management raised its full-year 2026 Organic Sales growth guidance to 8.5%-9.5% from 8%-9%, while maintaining Adjusted EBITDA guidance of $3.5^c-$3.6 billion. The raise signals confidence in demand and customer implementations, but investors will need to weigh it against margin pressure and the company's continued heavy investment in people, infrastructure, and automation.

02—Key points

Key Highlights

Net sales increased 10.7% to $7.352 billion, with Organic Sales growing 10.1%, driven by 2025 new customer implementations and existing customer growth.
Net income fell 25.8% to $239 million; net income attributable to Medline Inc. was $129 million after $110 million attributable to noncontrolling interests.
Adjusted EBITDA declined 10.6% to $776 million, and Adjusted EBITDA margin compressed to 10.6% from 13.1%, reflecting tariffs, higher COGS, and operating costs supporting new customer growth.
Gross margin contracted to 25.0% from 27.5%, with COGS up 14.3% outpacing net sales growth of 10.7%.
Free Cash Flow fell 45.9% to $316 million as operating cash flow dropped 39.6% to $412 million on working capital investment in receivables and inventories.
Full-year 2026 Organic Sales guidance raised to 8.5%-9.5% (from 8%-9%); Adjusted EBITDA guidance maintained at $3.5-$3.6 billion.
Net leverage of 3.1x, with $2.2 billion cash and total debt of $12.8 billion; tax receivable agreement liability increased to $4.0 billion from $3.5 billion.

03—Questions

Frequently Asked Questions

Why did net income and Adjusted EBITDA decline despite strong sales growth?
Sales growth was offset by a 250-basis-point gross margin decline, driven by higher cost of goods sold including tariff impacts, plus higher operating expenses to support new customer onboarding. Net income was also affected by a one-time employee bonus tied to the IPO, which was included in transaction-related costs of $35 million. Lower interest expense ($136 million vs. $210 million) partially offset these pressures.
Why did the company raise its Organic Sales guidance but keep Adjusted EBITDA guidance unchanged?
Management cited strong momentum from existing customer growth, implementation execution at scale, and new customer wins, which supports a higher revenue outlook. Maintaining the $3.5-$3.6 billion Adjusted EBITDA range implies that margin pressure from tariffs, cost of goods, and continued investments in people, infrastructure, and capabilities is expected to persist over the remainder of the year.
What is the difference between GAAP and adjusted earnings per share?
GAAP diluted EPS was $0.16 based on $129 million attributable to Medline Inc. and 825 million diluted Class A shares. Adjusted Diluted EPS was $0.33, calculated on Adjusted Net Income of $433 million and about 1.32 billion adjusted weighted-average shares. The adjusted figure assumes full exchange of noncontrolling Class B units into Class A shares and excludes intangible amortization, stock-based compensation, inventory adjustments, and transaction costs, net of tax.
Why did free cash flow decline so sharply?
Operating cash flow fell $270 million year over year to $412 million, mainly due to a $141 million increase in trade receivables tied to sales growth and higher inventories ($4.8 billion versus $4.8 billion at year-end, with build primarily in working capital). Capital expenditures were stable at $96 million, related to distribution center automation and kitting facility investments, so the decline was primarily operating-driven.
What are the key balance sheet and dilution considerations for investors?
Medline had $12.8 billion in total debt and $2.2 billion in cash, producing net leverage of 3.1x Adjusted EBITDA. The tax receivable agreement liability rose to $4.0 billion, which represents future cash obligations to pre-IPO owners. Noncontrolling interests remain substantial at $8.1 billion of equity, and the share count rose, with Class A shares increasing to 846 million from 812 million, reflecting the continued exchange of Class B units.

04—Continue

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