PDCO - Earnings call transcript Q1 2020 | Patterson Companies, Inc.

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Operator

Good morning. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the Patterson Companies’ Q1 Earnings Release Conference Call. [Operator Instructions] Thank you. John Wright, VP of Investor Relations, you may begin your conference.

John Wright

operator. you, Thank and fiscal everyone for in participating Good first thank quarter Companies’ XXXX earnings Patterson morning, you conference call.

are Chief Zurbay. up the Joining Mark quarter by the today Patterson’s to will Chief first and me open we Executive fiscal Walchirk XXXX and a your Financial After Don call management, Officer, review of President Officer, questions.

certain These forward-looking you during this Before which made in and actual we comments nature begin, results uncertainties. that let certain risks subject could cause to me indicated differ from and such materially the factors We material. call are discussed are in and remind filings to to other in those Securities XX-K in Form you forward-looking Exchange Commission. this encourage statements our and with detail review our conference

we contains about The including is information shares internal XXXX. in comments and market the markets call based of XXth, estimates. pattersoncompanies.com. financial forward-looking accurate analysis to the as circumstances and revise the addition, or events of conference no rates Patterson Relations time-sensitive Investor the are this date growth upon of company’s of live that broadcast, only of be the serve, obligation at content any date reflect to can found presentation call. after Also statements slide this our or a website the section update undertakes In August

the Patterson deal Inc., per tax Patterson reserve effects these and Companies restructuring expense we amortization, XXXX. for to our adjusted taxes, measures, reference and expenses, provided tax or first along fiscal share GAAP attributable operating items. conference results of will the release of table income The reconciliation income attributed and Inc. net with of Please gain, namely call, to note diluted investment income, in costs morning’s benefit, before reported in business related that the quarter our income legal adjust integration impact this income, is earnings Companies to for press net

particular, defined flow foreign internal product in which to and in adjusted press measure, the impact We at impact a free a non-GAAP the will in will call release. exclude week. available and today can cash will and represent adjusted is In period release, morning’s term our adjusted for reconciliation also to results is selling of currency discuss changes we currency. relationships. for found replay use earnings our sales this one foreign net sales being and Time This be noon reported recorded of The of be Central starting

Walchirk. to like I’d Now turn call to Mark over the

Mark Walchirk

John quarter welcome Conference Patterson’s you, everyone first and Thank Call. to

impact continued environment. the results first over of team reflect effectively profitability our Our key and improved past quarter to stabilization performance. the market evolving an through manage in the end enabled and business The execution to of core of year initiatives has our our our focus drive

we get details Now, the few into a before quarter, would key points. of I the summarize like to

grew adjusted earnings and X% delivered second in we quarter the First, consecutive year-over-year growth. nearly of the adjusted EPS per share quarter

than segments and in XX overall margins basis expanded our operating profitability we Second, more our year-over-year. enhanced adjusted Health by Dental both points Animal and

Next, we the adjusted cash adjusted flow million quarter cash free for increased XX% generated free in year-over-year. by flow $XX.X and

$X.XX finally, and $XX.X earnings million we cash to during shareholders paid cash quarter. $X.XX the our to We per of range in return guidance dividends continued to annual And adjusted reaffirmed share.

operational and of quarter one the growth, focus expense improvements, management the three of we am to on and the on our our was I very do our focus progress team our are with highlights to to revenue discipline. Despite our enhanced work have profitability lower still areas, and expectations year. right deliver drive ability first on through key mix track of pleased for our we While

a take of year. One we our specific is shape the for like the minute to of initiatives our balance Now quarter example these into each operational well position in results and service the segments, more how focus on deliver us customers dive discuss of improvement made These the the enabled local before support to enhance business technical team. helped and center. Patterson’s I’d our we’ve to to profitably support us have valuable tools expertise in that who national infrastructure productivity of the rely on-site tools

increased Dental examples growth our and private mix is our operational our focused include in initiatives of in business team to software double-digit label. continued growth our e-services as our Here, of our as our well team value-added on on focus productivity and resulted segment. analytics Two excellence. service technical services improve our in The within

Animal across manage our with strong which these provide higher relationships leveraging we came specifically installed Importantly, e-services in services respect With insights. software third-party improvements Health to effectively their both and to and these vendors customers, succeeded software more help important our to base and with margin segments. our data them and Dental practice

profile. customers, margin our services highly also our these to accretive addition value In are to providing to

Finally, investments to while focused business. remain our areas we us cost continued are aligned of expenses carefully adjustments growth profitability, customer to the allow our analyze and the ensure to we needs structure and with making that appropriate have in the benefit and on drive make

approximately XXX quarter. As the planned and during discipline specific of we example these existing a initiatives, cost positions first reduced

pleased focused company three positions. key these I’m on primarily were with in and which team’s changes drive roles on the quarter. focus administrative not the across performance our customer our areas, facing these Importantly, helped

with Health. each turn our business will Now segments I Animal to starting of

the margin driven nearly in U.S. margins Our first growth animal in quarter, on companion for points overall and goals sales margin primarily animal Animal segment year-over-year our Animal we operating and and the internal its XX line for Health internal achieved a basis increased basis animal top the despite gross Adjusted expansion profit companion Health operating quarter, the increased softness. Animal by X% Health both business. saw in during segment by quarter, importantly, businesses. the sales production X.X% operating

mix is our of driving improvements profitability improved previously, management. mentioned and on the focus our I result As effective operational

within value customer. efforts two of margin our Animal that our on segment Health examples increase the Let me specific by to profitability to also focusing accretive initiatives give provide

label commitment label expand business to private during in our growth sales of our ongoing animal double-digit products our First, the private quarter. companion generated

a We also called portfolio. broader private and continued add our private label to label new to brand Pivotal SKUs launched

brands Our serve Patterson allow at with Patterson. more private our attractive for profile customers and label a to price at exceptional affordable product margin an

evolving of is meets Secondly technology our demands comprehensive that to progress veterinary solution provide a our customers. the

gaining innovative practices. are as easy is manage NaVetor them their traction Practice in and solutions implement software Our veterinarians that technology help Management the additional market seek to

benefit strategic we addition, our continue from In to with relationship VetSource.

a powerful to designed improve increase and the client enhance a of suite than decade, For revenue provided to veterinary has tools, of compliance, more across VetSource country. practices relationships thousands

in in over veterinary across ScriptRight the which hospitals to Importantly, clinics and needs customers. Patterson e-commerce to effectively compete to been now of and platform home traditional and and fits specific is relationship, VetSource continues veterinarians solution strategic and delivery the this integrated XX,XXX able delivery an their installed Through us position a both solution. tailor best country, distribution has the offer well that

market beef dynamics challenging side, a primarily bottom through Animal macro market On still That meet successfully and On impacted policy. line tariffs end trade the by end we’re to team Production Animal our by line our the quarter and performance dairy to managed more was and markets. production the said, related goals. level, their top in able was difficult affected in market also a uncertainty the environment Production

challenging Looking expect this projected ahead, our however, on timeframe. of service are market us rest the swine we during market above stay markets continued year focus to Animal during to and we dairy this the for remain to and products meeting the the and execution these of continue calendar at positive headwinds, or Despite anticipated grow of beef our the our fiscal confident year. the great sales the needs team customers Production slightly leave will continued

confident management. continue that our effective and Dental is operating of our points market a overall X.X% quarter, grew sales slightly. to first dental the on demand basis we operational in mix growing margin now XX year-over-year stable through the segment, decline and adjusted improvements end basis Turning modest be a Despite in to

that We are goals its our quarter. profit team achieve was to for the Dental pleased able operating

we work is growth working. sales we gives positive continued our while consumables the trend strategy to our positive see And of have our improvement. side, to do growth, that year-over-year confidence achieve sequential to On us to still to category consumable return trend consumables the

We ongoing will in organization improve and our invest continue to execution trend in expect to improving our actions for field productivity sales our this category. drive tools

in from Equipment X%. quarter-to-quarter. equipment As slowed the growth first in before, sales which grew I’ve CAD/CAM can quarter category, except the said markets vary the

on year year levels in the XX% As the the equipment promotional a strong activity was lower of our expect reminder, half last XXXX fourth market. anticipated continue and the to following compared in see the to build growth Slower prior in Similar the from increase offset value see quarter period. revenues year, equipment of the business, equipment in when which manufacturer new we fiscal slower the our to performance our was ability in digital gain to support Patterson’s product by and partially the strong generate. those equipment up revenue XX% our an our quarter. in national higher equipment the services was including and margin comprehensive strong enhanced responsive services, provide as reflects value-added This offering additional customers investment recurring local well sales the as service to second growth technologies sales additional traction return of and

results. the at Technology Center advantage. throughout continues key technicians staff clearly our service seamlessly area Our customers stands equipment and cycle their highly technology and in is and that’s our of service Patterson to dental local life maintain where a our experienced Patterson support technology support team to ready reflected an in Equipment its

the and are after and are with long current future is provide sell we to We uniquely complete. exceptional purchase marketplace as positioned customers support to into their innovation service excited

are accretive continue areas. equipment we our to effective margin Dental drive well across business, management e-services and services important as mix As software as focus

ability operate across proud environment. I’m of evolving in Looking segments, our the of our team’s to both

of We for is to benefit value are and customers our in strength our our the proposition we in fundamentally capabilities and success. of and business that continuing to long-term ongoing confident our invest the critical believe our

looking meet technology products, efficient is it’s the them goals. personally and advance clear they practices and are our help to of to their to needs and comprehensive with along our a Patterson services for trusted a evolving I business solutions. customers run help of provide As with partner portfolio customers, operations

Our continue value and a for enhanced shareholders. trusted commitment to for partner evolving the business to our will enable and our in customers operate customers to effectively being deliver environment us

now a into then will a your take I and make for turn call few questions. we that, Don results will over before our With closing remarks financial I to the deeper dive

Don Zurbay

of each good I of fiscal highlights comments a two the quarter segments, in first I initial few the and items. cash you, entire company as balance everyone. My and will financial Thank XXXX, the through of and cover Mark our morning performance will flow our highlight walk business then sheet the and for

$X.X our X.X%. Consolidated quarter XXXX reported year-over-year fiscal are currency relationships first decrease continued this Companies the versus impact We sales and a product translation year effects increased internal Patterson X.X% were selling for This which in ago. changes positive slight positive the grow of sales and represents billion, growth. a reflects the sales of first fifth stabilize Internal for our quarter of quarter adjusted the believe business. consecutive trend of to initiatives in

basis quarter of quarter first fiscal basis, in a we were net XX of achieved certain percentage gross on an timing of to XX sales basis XX.X%, improvement what consolidated first as operating related Adjusted XXXX. from primarily up expenses was points a Our year-over-year for expenses. of QX points the margin

and As of completed in align our properly higher modest discipline a mentioned, growth our cost customer-facing with invest headcount cost part business as to initiatives. quarter, structure the to we during Mark the and adjustment

and business our the while and continue carefully level, operating for long sustain need to segments balancing corporate business the investments within We term. the for also at our to the manage expenses grow

our first consolidated grew that over modestly, line the operating margin only on P&L bottom point quarter, for which basis to the here top deliver managed a In while was the important effectively to we represented line. our the the plan improvement note adjusted prior XX X.X%, It’s year.

discipline We how contributed and pleased practices in established our to the have are XXXX operational momentum and results fiscal XXXX gain ways. in with have fiscal tangible

totaled net legal included of investment investment share. per $X.XX GAAP Companies Patterson related expenses, XXXX. in fiscal restructuring X.X% line, and income equity the Companies for an quarter net that investment XXXX, was over This increase diluted in Adjusted income share earnings Patterson and amortization were of $X.XX which on On to net per was $XX.X diluted quarter share $XX QX both costs to the deal over period. of year the per the gains, attributable a and per or business million bottom X.X% Inc. of attributable recorded first quarter, for in Inc., fiscal a share, legal first million costs, charge to an adjusted first increase quarter. $X.XX a diluted Adjusted excludes the $X.XX gain a reserve integration diluted income the settlement prior

Now QX operating growing at were our Adjusted margins increase ahead In in our in X.X% Health both and producer production the Health a basis This segment cattle expansion to to partially of business, and U.S. compared the our approximately animal sales place year business production and market. primarily year. animal market. a sales the businesses, our performance let’s This Internal animal QX, was animal X% took margin in business. profitability point nearly to offset growth an period are for driven production our related market reduced the the slowing in Animal business XX in improvement the companion companion operating our category we animal of turn Animal overall by ago. both or of beef prior and animal of segments. over X.X% believe business companion categories by increased we our same

Health the commitments their While our segment our animal, impacted profit top for quarter. in Animal in production the some delivered team by market on softness line was

Patterson on during to business, of dental of decreased quarter decreased internal X.X% first same compared a versus same In compared quarter the supplies move improve to first sales let’s a Now dental XXXX. X.X% productivity hires period consumable sales, our the to experience of On decreased the year that X.X% basis, our ago. sales fiscal dental business. sequentially the year sales and most of equipment Internal improves. team however, ago. to the continued as quarter the recent Consumable steadily sales in

and fourth market dynamic quarter, activity As also to fiscal often can the by QX our in compared stated, that by point equipment equipment grew the impacted equipment improvement management. quarter the QX and promotional less from disciplined quarter margins sales execution, to X.X% of in private this Dental improved the sales quarter. to manufacturer year reflected operating worth fluctuate also we were year. and value-added continued basis operating we approximately accentuated compared margin It’s was in quarter XXXX negatively the have mix label increased finish our category improvement an from expense was prior result to XX%. when that strong This the Adjusted and noting prior XX the sales in services

sheet Now let’s balance look items. at flow several cash and

During QX fiscal $XX.X in of million used operating cash activities. we XXXX,

the the cash also We statement. our for statement appreciate activities the the line $XX.X quarter, collected cash which of established in year. our improved trade million last have year. price the we million the to combined of of the million This items quarter. calculating $XX.X total free of XXXX, deferred from is the of than flow, facility included amount receivables in two $XX.X AR cash investing is defined adjusted in which excluding flow fully cash initiating When greater section press improved benefit compared release, flow when fiscal $XXX.X million cash these flow, To one-time by QX prior our purchase totaled we

continue receivable, payable. progress area accounts in managing inventory, of We and the accounts to our make

up put we business year our the favorable We potential and one favorable additional this or work categories for During to to by ago, return cash are and to to sheet focus improvement compared improvement more and remain believe by the diligent shareholders. here and will to efforts extend there in free million, in quarter, first items in $X these the is balance are million. same these $XX

we return of allocation, strategy the capital to in on cash our our shareholders to XXXX, to first quarter continue to of execute form fiscal In to million our we shareholders. $XX.X Turning dividends. the returned

to continue nice plans Board on shareholders the to dividend Our baseline performance drive important value our to to a shareholders business. yield focusing return current as improved of we our our the provides view dividend in returning and as continues component an

some conclude XXXX fiscal comments on guidance. me Let with our

for are reaffirming guidance XXXX share. For earnings our of per year diluted range we adjusted our to $X.XX $X.XX EPS, adjusted XX fiscal fiscal

that our I purposes, of share included per a quarter, earnings as would adjusted you think $X.XX fiscal of equity for XXXX our For accounting. modeling quarter you the about second related second remind gain to

the back will I now, And turn call to over Mark.

Mark Walchirk

Thank you, Don.

in adjusted $XX Now before highlights up would profitability wrap EPS We in some enhanced questions. again, Animal both we and segments. like I adjusted our We quarter. generated We take X%. over your free grew recap cash Health the to, flow. and million Dental the from of nearly

profitability form improvement first first to want of underscores earnings for our our of And improved quarter cash in attractive the traction to fiscal the we shareholders the the finally, return XXXX, guidance our to drive in our to performance plan. reaffirmed I gaining the that year adjusted continued from year. began We dividend. actions in that are the we three-year full our reiterate

on We the make priorities value bottom will and against we strategic our three and that future to and top are and invest the in the shareholders. focusing deliver and XXXX momentum for progress on business to for our this line us leverage enable grow fiscal enhanced customers great to continue

upgrading value services continuing capabilities, and we in ongoing offerings. the value-added sales experience, proposition our enhance through service our field in sales customers customer This the First, to our organizations. and investing value execution, broadening through involves our investments proposition are improving measuring to our and digital our

improvements driving capital and by positively performance. excellence flow generating disciplines our margin cost we improving portfolio, are and are mix expansion and focus operational our in management our Second, service working of and private ongoing product on label management our impacting on These disciplined foundational disciplined strategic continuing through we to the focus cash traction sourcing, management. mix. finally, And gaining are stronger and

team and energized while and our impact businesses, Our investing which positively growing our stronger to in us differentiate the in value also our driving performance focused is market and proposition, across on continues results.

Finally, we our improve our to and are on focused return driving for shareholders. squarely continuing performance greater

your Operator? the open so that with and take Don questions. And line we’ll I can up

Operator

Instructions] Please Our ahead. [Operator from first go Suisse. Wright comes Erin question from Credit

Erin Wright

of had production groups recent animal and of underlying there couple trends characterize shifts both was you you. veterinary companion I how How thanks. out would of or Animal questions gains trends? demand species of animal any meaningful visits kind bit the in markets? companion in performance Were herd across Health and Great, a for the office the market parse can share dynamics across if you a much more, each Thanks. demand little versus underlying

Mark Walchirk

Yes, Erin. This question. is thanks Mark, the for

Health each I Animal general, segments, certainly of two know within think as you some you different have about key got markets. you’ve then of and obviously you the certainly segment So, think in segments kinds those

first X% evolution online continue we via we’ll business quarter, an a maybe We some you during of results that e-commerce market in a that with So in have, to via to segment. serving our bit the X% X% and kind really platform relationships about line standpoint. see standpoint. top at taking companion U.S. growing we’re talk that pleased believe are the the from Certainly, have of the end partnerships place from first. is think both that We growth higher companion we we the certainly our segment. certainly companion nearly that’s And

of our proposition very and certainly, is there, customers the getting companion pleased value that. and believe we’re So for comprehensive benefit our we’re we animal that

issues, production is to continuing of pressure just continue be at has markets and certainly as the top be know Obviously but we And quarter really lean and we there. for I that key our expect by kind that, animal as of challenge as somewhat beef to there, Dairy, certainly given under challenging could the us earlier, the I margins to and they you if you some do expect some some of that If bottom business well. you trade of we’re positive. swine three obviously, continue issue really line And that to look at think this end that with tougher Certainly, goals. to as look resolve, market further kind continue. but the their these was environment pleased positive. market we business, quarter, their for the expand indicated look the We met been to market. fact in a distinct in time certainly the line production macro some tariff certainly perhaps affected think

Erin Wright

pharmacies, And recent you highlighted manufacturers Okay, a now alternative How Animal some VetSource products. alternative that, specifically working the establishing you potential but think playing just have great. light or some floors developments for to that guess online do you then opening recently? VetSource, with in Thanks. for those the does channel is in or large pharmaceutical with dynamics of price how I about even directly position of the the follow-up prescription field that the how of Health happened impact of

Mark Walchirk

thanks. Yes,

certainly we mentioned VetSource believe So I of discussion. that obviously some is that well. positioned during the

the manufacturers, general, the that as and certainly evolve manufacturers and them work to customers. with in that closely our talked think specific to and continues the strategies for we’re we partner relationships to across we’re manufacturers and the ultimately we about value common we ourselves a the although talk team continuing I channel our working with of as goals about continue really on with continued pleased have can though of to look, not certainly our together provide serving comment markets how the pricing channel we going

And so platform. we think that great is a VetSource

mentioned, business well the services, quarter. As the continues added our Health our about support have also the we up we customers. value oriented Animal retailers, space, is parts and our we’re have as in those And in equipment, both with veterinary to to technology, say, and of also product market I focus were would the certainly I excited non-pharmaceutical some of double-digits comprehensive offering the as really relationships that on certainly evolve, service practice that core

the and us we our U.S. So that value believe companion that contribute important comprehensive all to is in segment. help growth really for prop

Don Zurbay

the I value Don. think this as just segment that that I business. the we optionality, how of that we Erin, have we mean, is And the of here I evolve think, is things see things in one Yes.

Erin Wright

Thank excellent. Okay, you.

Operator

ahead. Our Ellich Craig-Hallum. next from go question is Please from Kevin

Kevin Ellich

morning. Thanks software from going you the forward taking going I and much your Mark, higher how to, margins comments point for guess, versus your and and Good to for Is be in e-services. guys a higher are the margins go about coming those Dental wanted Animal Health? to that questions. traditional back margins focal

Mark Walchirk

Kevin a a we e-services thanks for tremendous of software the focus within think been absolutely first a and Dental Well I has all, franchise. us installed question. and for the and base be will our continue focus to have

base installed and customers our our Animal a value building as complete solution. proposition really our really of obviously our important franchise We’re Health a to brings to it within this technology is have value part

We this invest in continue in area. our building to capabilities out

analytic develop third-party continue with relationships vendors that customers. some services to to wraparound software We our provide

but yes, definitely is will it and the so, I’m not our margin, to certainly continue absolutely a to profile will going And accretive this overall to to obviously, get we exact on focus forward. continuing an very into focus going be area margin be for us.

Kevin Ellich

combat of piggybacking that that that it, to strategy think you’re business? manufacturers do of anything there question, that direct Got to to you is your prepare or might to previous helpful. in impact then have on Erin’s it. kind and off talking what And doing you about with That’s your planning change go anything plan the or just

Mark Walchirk

change. a that’s something necessarily not is this that say would I Well,

been the both? Animal segment the you or about with evolution manufacturers. or specifically Health talking I has Dental think Are there some

Kevin Ellich

Animal Health. Health, Animal

Mark Walchirk

and Yes, that sales the relationships. I with think Okay. we’ve has closely some have the modest time manufacturers something been working I there some mean, on for in changes this been been

in We we’ve we of the the well. both highlighted manufacturers and the number channel customer believe over tremendous as end last value I to think to quarters. those provide certainly the

channel with I good that we discussions think certainly certainly, success believe we value to is of customers. market to can that continue evolve, do continuing going end growth across believe for the a our provide. that us provide our we to will and manufacturers – the what we that support to together the we continues we tremendous And testament we’re their drive can help the companion that what again to business, again support value And about to animal but we X% nearly have forward. do and

Kevin Ellich

you. Great, thank

Operator

from next Jeff Baird. go question Our from Johnson is Please ahead.

Jeff Johnson

Mark Dental second. to your Thank maybe over business you. a Good morning switch and wanted guys. for look at

talked includes that, On growth that you’re you would in in confirm maybe systems, but DI assume seeing about quarter. and I the CAD/CAM demand you the could tell then the if new that X% for what DI? And a some even what systems launched bit full of quarter trends the number may X% in with recently. expecting we little be versus below were that the us scanners have here

So you be some for demand a would of of trends as scanners seeing maybe what kind are anyway helpful? Thanks. newer category those

Mark Walchirk

Certainly the growth Jeff. the technology. question. into Yes, include the different all Thanks the don’t quarter in dental said past, X% the sub-segments specifics question, the for products. around we’ve And DI does yes as to in the first of part get of we your

QX. mentioned think key that I I of factors. area, strong a in we our we a revenues I mean terms overall the quarter in think very couple as had of

in obviously believe CAD/CAM fiscal were increase than overall the sales greater I is our fact, up great QX. in testimony our driving XX% and our QX, productivity to which sales In revenues demand a our equipment and reps

think some QX. anticipated softness I So in we

mentioned activity also, this we promotional there less As quarter. was

standpoint, we this demand of a as from quarter. think kind I view So one

on we over get products earlier, anticipate, traction ramp believe mentioned work as new up that with They continue as coming past If the we And which we quarters, strong. five very you are we continue to quarters growth certainly we the to out to equipment over is in our I X% – X%, introduced. being manufacturer partners. believe look overall is our the

seen. to the see we We over a at again, continue looking the expect demand rate activity to promotional out we’ve marketplace the period time longer that continue of trends in and

Jeff Johnson

you. questions on much those then Don, done think, much And talk the so just for or almost for you don’t obviously years. XX% doubled XX% or peak, come corporate their a you’ve finance think lower how excluding about maybe do Alright, receivables line modeling XXXX off you financings receivables questions one, thank equipment two the so you, number are heard to down, can down that revenue How receivables and year-over-year. further that. about I I of now

EBIT Just that that through line how Thank flow and you. what that item? into corporate flows to from does

Don Zurbay

uplift revenue and Yes, plays equipment financing we forward dynamic. the an the the is by did relative to yield how curve in largely corporate line and really that driven that the into quarter have there

instruments well in loss comes those However, if are P&L. remember, that down you hedging and there below on as hedging we so the is a

geography to the in you fairly when that curve. that the there So mitigates that to keep P&L yield have relates it substantially mind

sorry, Oh, AR And was first what your yes...? question,

Jeff Johnson

receivables, receivables, yes yes. Just

Mark Walchirk

receivables. Yes

inventory, I point. to we with the the But this that we’ll at lot more opportunity down. think us, continues things with a of where But We opportunity have to making there. we’re to – at bring yet. at on really capital continue we’re for working we’re bigger to doing try to pleased where think different not in with really opportunity Obviously where work the progress. we’re and be satisfied I receivables we’re think, continues great we’re

Jeff Johnson

Alright, you. thank

Operator

from Santangelo Please Our next Guggenheim. from Glen go is ahead. question

Glen Santangelo

up on I Yes, just want thanks. questions. follow the Mark, to revenue

on your and the around health territory, the be progress the on XXXX traded what’s the sort of some make give sort a couple company was side, was wondering sense animal You Dental call a weakness going XQ could market then do you path and a what the may I with market think on ultimately I what’s dairy they contraction and positive of that back issues abate. specifically that overall more the secondly, in event in are that you us to about peers your of sort with side consumable because publicly maybe continues may and little on and when you on the growth suggested beef that of hopefully like feel they And color of color quarter. second be gave in into if commented their modest the more bit could you reported the side.

helpful. line So be trends anything assess to us top help you. would better the Thank

Mark Walchirk

in slightly bit the part three in markets; first softness talked specifically our Where I production the Animal those cover to think maybe little we we health. question, the swine category markets, being did for Thanks was a and positive. three about see core Glen. the Yes,

I of a the of affecting the etc. their real to are of etcetera. product think market market the with demand, goes – producer, market the end change – demand end in where there was producer, kind terms dynamics of the when with relationship the quarter timing beef the number the in the the there

consistently of And in certainly, would of soft, demand I a think terms products. just been dairy there. say has So, dairy general is factors for more there number I

a think there I certainly lot in about discussed been has the marketplace that.

the again, more continue the the probably in is to markets was three for So, in expect think challenging there, that us one that kind beef different but area. of I quarter we

Dental Turning from mentioned and area is positive to the market believe overall. stable we a certainly, the slightly I standpoint, as consumable that earlier,

important it’s into business. we’re We for we are Obviously sequential to category. the us with pleased our consumables that the positive – in plus continued move seeing trends

the It us that confidence is up is continue does some of year-over-year the on unit our One volume. things year as a give basis. actually throughout we

we And it so, where that about mix continued from focus comment things expect we am continue. specifically quarter and market, I the trend we’ve will the positive. on certainly to we about precise good going the exact we be consumables the obviously about turn as not But the think and there. that that affect trend label, to private believe feel on seen

answer helps your that hopefully So questions.

Glen Santangelo

flow. maybe can And question for just does. the if I with it cash No, with Don to one respect follow-up

If adjusted do at continue the initiatives. look basis, at of receivables, level your that forma that it I positive. can or feel in from of the you and into negative they to terms was think the sort feel what of sort perspective. an how and markets in go is take of when flows this can to in really you growth invest you consideration on the comfortable receivables, dividend on factoring much you the a the current at were you meet quarter, sale And you more to cash comfortable the do these operating But continue obviously if look trying at the pro you Company’s assess flows that, level, cash growth

color sort of any So, dynamic? that around

Don Zurbay

deferred quarter. it do add when cash flow had you receivable, about to not context, price number. the and at really look purchase that Obviously, Yes, in so the in really that’s as nice operating a a activity our mentioned, take we’ve that you you sustainable we but have and and negative in XX% growth cash our flow

the as moderate. some you’ll there cash above that growth, the income I generate we think growth, that ability our net time to you’re income see flow cash improve over what I see flow is but expect is, net to going

continue basis, We’re receivables. sustainable fund is on nice cash as that and shareholders extremely ongoing return our But I to yes, that think our of can, cash to Board an to back of think ongoing a not shareholders. We to allocation dividend. that initiative we of doing are we can we piece that’s really comfortable an supportive factoring our anymore do

need I with flow income M&A, the as improve continuing that the that think opportunities in confident to there So, right do that improve be look feel and that, we I growth think in for to but is I the that business for but invest and need mean to then balancing to there of we cash we the and we think continue how as opportunity we Company, prudent well. the terms we to

Glen Santangelo

you. Okay, thank

Operator

next ISI. ahead. from Our Elizabeth Please question is go from Evercore Anderson

Elizabeth Anderson

pretty question an year-over-year. go on have the a to sequentially morning Hi, what’s big want change profitability good guys. a there improvement obviously step I that was just line, corporate ahead I

if the maybe And so, out comment any like were or see could sort you how factors the you impacting? year of the on rest perhaps turning and that pace there of just one-time of that are

Don Zurbay

a question. looking is this which in Thanks I on is prepared at the Don. GAAP assume press for Yes, you’re release, the the table basis.

and And both so corporate of that driven settlement the million year $XX this million legal that’s $XX for was of delta last of showed and had year in number. $XX one a is a for this but legal an that’s by impacting that We settlements. QX really million QX year year; in about improvement million one $XX last million there and $XX so line

adjusted on due the to corporate that. some the the are related actually how which think I receivables in quarter into our slightly timing impact discussed I’ve fits expenses equipment numbers, into what were real and earnings which you already equipment remaining primarily I as issues and yield if get that curve was the favorability then some financing up the to valuing

So, per were from sustainability, slightly. adjusted standpoint, very I there it’s what really like mean, doing but We earnings an in terms sustainable. share we’re expenses up of

Elizabeth Anderson

Okay, That’s change And super for helpful. the your share expectations have year? perfect. about do any you in count

Mark Walchirk

go rest would No, slightly, alone will without increase right I now think it we’re at share where left but the the share generally you year. about really count I model the through repurchases, of as

Elizabeth Anderson

Okay, perfect it. that’s

Operator

is Our question Brandon Jefferies. go from from next Couillard Please ahead.

Brandon Couillard

the morning. business? could you Mark, business the on for terms label private color terms you relative us just where Dental in of side, that spoke Thanks. Good of Health on stand growth rates or the builds to SKU you in side give in Animal some traction

Mark Walchirk

thanks Brandon, the for absolutely, Yes, question.

business in previously, our overall quarter. faster within indicated continued the we’ve private as trend than Dental actually think our I the terms business, of consumables that growing in of label

area. that to focus continue strongly We on

new We continue to at opportunities to products. look introduce

field We continue sales incent organization. to our

continue the closely supply faster a manufacturers standpoint. basis continues in there with label on certainly profile from chain referenced our mix We and something certainly earlier. drive a than And our year-over-year to consumables work help our of Dental to some business continue overall and we that contribute from business that’s that private to the Dental margin again, and great expect segment grow value improved we to to

Brandon Couillard

in of office, there Don, of types moves for would question on And gross room year-over-year mentioned over margins first go sort start? and two-part some the a the to terms headcount more of mainly the those the be quarter quarter around And balance the you reductions expect Thanks. back line, is gross you full on of despite margin year to the then, down still year. better for in

Don Zurbay

there expense really I Is room? we’re at Yes, our mean structure. more looking continually

I manage think we’ll to that. continue

continue we find potential there that We will think areas is opportunity. to some

continued you see I of not But there’s cadence year, we expense of probably, think kind reduction. that just anything as So, that I of think find you may more trying go through realize and to the magnitude.

on fiscal of look the you ‘XX the terms I’d the In good slightly flat profit, probably think to think margin, I’d at the the really ‘XX. you to start, the full year gross up I probably, gross year with margin potential for over point fiscal full I as

Brandon Couillard

you. thank Yes,

Operator

Kevin question ahead. UBS. is Caliendo Our next from go from Please

Kevin Caliendo

more made around call. comments taking for talking especially directly marketing on Dentsply quarter the some call my their dentists. of some around of thanks changing and marketing, end to Great,

going that? about survey more suggests that dentists and directly on little the data of Some you like you the DSOs. are market equipment Can recently Are the both talk also seeing side? manufacturers Dental we’ve compiled in bit consumables that to anything and a

Mark Walchirk

terms from pleased that. good area we’ve in an that with certainly, focused have we’re we’re seeing obviously that our Well, of we’ve the overall. That’s very business with we and part been results invested some our on, DSO that in relationships Dental customers, of

market, question wide partners high-technology strong as wide Patterson services we in to great believe sale. promotional partnerships history big they understanding question a and technology is our similar market. in and dental products, of frankly of service efficiency we the both we that advantage Animal bring that in mentioned after certainly, like the technical provide of the Certainly, of portfolio customers range full market, Health supply across expanded a on the believe technology DSO certainly the focused for products, that to answer customers bringing working have creating value services see and the our manufacturer of terms Patterson marketing I partners value of jointly a options market on to in and kind chain. terms to of focused provide a in space, certainly manufacturers customers around with the some a and of think your the lot and of bring of kind before of and our those of their very manufacture service equipment value innovation activity to we’re products range in general products, our providers great in within the technology and to closely I I And we the jointly with and our space well products, the our and the these and demand earlier, as help new

So we we demand generate that. and we’re that think excited benefit to manufacturers from continue do certainly see will things the to

Kevin Caliendo

there Great, of moving space, Are DSOs. thanks. increased you opportunity in the seeing opportunity? of and an share you DSO How seeing more forward? terms some RFP sort some increase you up follow-up in activity? new land the are DSO guys you Is One picked I up lay know on signed have RFP activity? of would

Mark Walchirk

the would think is Yes, I necessarily of activity. consistent. land RFP there’s any more lay don’t the say I

so think the with is multi-year obviously real large the contracts I on and DSOs national contracts several come every there. years, certainly there nothing that change that have, up

I a think area. obviously that’s in growing DSO space, the the regional RDSO,

XX more we create activity As I national than I Certainly, and partnerships, technology months in investing wouldn’t earlier, that our opportunities real there for sales field our continuing area, there mentioned thee, but and support that sense broad that any products and solutions there’s and where is that the in make that and to customers good look six, forward and we’re we to ago. to infrastructure services provide. support value those say can Patterson closely the work both really pursue regional with was DSO

Kevin Caliendo

thanks Alright, guys.

Mark Walchirk

you. Thank

Operator

Our go Please from ahead. Jon is from Stifel. next Block question

Jon Block

morning. Great, guys, thanks and good

the us Don, quicker follow least thinking the you Just around trying of to called fiscal difficult one maybe that then, growth and in out animal called guidance? or the take, to for about due it got the And stack. hey revs from moving able you at with the to offset up. X% you some production of more line out dialed that initiatives a just of believe that had nice in of I that most are of a that Should I really call the get OpEx, maybe dental implied around but high-level. so closer think year equipment quarter, sort sort of give I sort first to a couple me. that be two-year dynamics this ‘XX X.X% comps, softer just with lower step-up internal parts

Don Zurbay

No, that’s fair.

look probably it it’s that prudent that think I to I think that at way.

you if forecast, to some were dynamics, the animal companion of our recent into particularly in think those you’d most I see dig space.

now think look of the as, a over of the, again, here on think into you this lot fluctuations we’re different at I to the there. of looking we and the the trying But hit mobility have look to it sure taking upper hopefully because timeframes yes, rest because longer at I the run and at we’re consideration equipment dynamic P&L Animal that looking at we’re it continuing basis. and to a guidance some Production of put can ourselves also manage going how three-month in make we’re to to positioned into

Mark Walchirk

team that earlier, the cost focusing this we’ve improvements, focusing effectively, forward. that I things business the forward in benefits, investing just done look label, we productively some year, gives Yes, contribute in quarter and of more will particularly done indicative the would more this of and the been in over running the results animal quarter on is past that as think, efficient on the think operation, and the help efficiently, on operational and services; operation an that’s light efficient that I all drive in confident private work continuing number our done yield the over to as we’re through quarters remainder performance those softness, of think run I I in focusing certainly, I those shared to more confidence continuing value-added of would sourcing year, to look good work us as areas of past performance even and the we our that mix, driving category production just the we work add, say, better has going our

Don Zurbay

the kind sustainable only, The would most this things of year. happening rest characterize think the I those really outperformance mean, below but the as that quarter mean, I all it’s what’s the I any of of sustainable. one things. remainder in on Yes, I are line P&L of of all the the not type sales are time drove sustainable for

Jon Block

for back just equipment you And couple want to we Dental guys, make to dental of the is difficult the dental you for great. at more basic I think look consumables you the quarters. to Mark, more equipment obviously then sort momentum because we And that specialty. the toward when increasing part of that the out level, I specific you basis sure be follow-up, over more maybe you’re of earlier, next just alluded relative fiscal then, consumable I call specific to think comfortable feel but what you high TTN about on Okay, of the choppiness on despite will mean, ‘XX the did strengthen will comps?

consumable get my So, market we what flattish guys. I now. at Is is I your scraping if you guys. mean X% market just sort that want isolate for time on number? around dental arms of Thanks basic for your to you’re

Mark Walchirk

Yes, thank you. Maybe your question first. the second part of

things consumables as the as the and so on I a trending basis as in in earlier, a our would about units you we up do look consumables positive it’s at continued that’s certainly our year-over-year market, different and that’s think, is slice dice well. as dice like, provide mentioned the think slightly products the how certainly elements look reasonable probably stable provide I Obviously, you don’t we at we earlier, and and or of slice if the not that and the you customers and mentioned we’re one think good indicator all I of I certainly you we our can we But the positive, and mentioned. as maybe confident positive. overall market, are and the believe believe slightly up also our mentioned segments of

regard I equipment of kind the think with to area.

QX that, XX-months, quarters certainly that us continued a continue new X% point, some you positive, see kind over five I we you’re mentioned, all confidence look product we to in we work believe introductions, the your QX we grown indicated the as certainly as we’re of trends at of of at and about FY’XX to four doing the FY’XX that category can continue kind expect of we trailing see gives manufacturers, to I XX-month looking and innovation Dental activity, X% trailing think continued to believe that to the earlier, you and to business. promotional in with expect think our Equipment our that and overall into dynamic we know, a we’ve if past we

Jon Block

Thanks guys.

Mark Walchirk

question. I think we one have time for

Operator

Okay, Rich Goldman our ahead. last from go certainly, from Nathan is question Please Sachs.

Nathan Rich

the what you Thanks your highlighted are growth across of more and type the seeing comment you kind the a for of can overall Mark, forward? growth now businesses with progress them for curious, driving from question. acceleration was we you just in little going expect segments. I see software those that you’re you technology to guys are how making businesses and big what’s both should bit on and

Mark Walchirk

thanks the Nathan for question.

focus gets productivity, our that we these improve focus areas. growth that I we we things mentioned to customers. great can standpoint. I of those doing where and to a think continue service that believe areas These are Great value the excellence results. margin earlier. are are that analytics accretive These is technical as drive improved us areas of opportunities opportunities on to from to to the kind customers, really company we and have we’re to to that just what’s certainly operational accretive can help our focus. productivity, margins. to We support in our driving where bring find business profile are the areas continue are grow example focus mean on I that are a our where run

in areas. And going so, continue those to we’re invest certainly to

to continue not to you areas and areas, are continue expect the compared continued We’re these specifically I’m going to teams are those assure that size can I believe can to to focused certainly very other going that they we on invest into the focus results. that to in yield on but areas. we our those of good that go

So, thank you Nathan question. for your

the of Thanks forward time very all have everyone, call. that’s morning. with today. XXXX connecting we you, for all time look quarter you much. interest second very fiscal on your of to our this We again think Thank much and certainly I

Operator

concludes This conference call. today’s

disconnect. now may You

Patterson Companies (PDCO) 29 Aug 192020 Q1 Earnings call transcript