PDCO - Earnings call transcript Q3 2020 | Patterson Companies, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Patterson Companies Fiscal 2020 Third Quarter Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, John Wright, VP of Investor Relations. Thank you. Please go ahead, sir.

John Wright

good and operator, you, morning, everyone. Thank for Quarter Earnings you participating in Third XXXX Fiscal Companies Conference Patterson Thank Call.

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

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

about date the is events the internal or broadcast, revise the of forward-looking upon we this reflect to conference of no time-sensitive markets February statements are or after growth call update as the to undertakes The of serve, company's Patterson of this shares, circumstances market rates date content obligation accurate only addition, contains In XXXX. any XX, live call. the that comments and based analysis estimates. and including information

Also, section a the presentation at found pattersoncompanies.com. Investor be of in financial slide can Relations website our

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

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

hand over Mark to like I'd call to the Walchirk. Now

Mark Walchirk

John, third you, Patterson's Thank and quarter XXXX everyone, welcome, conference fiscal call. to

pleased quarter fiscal execution strong very our our we into the the heading of year. and with performance in momentum end third are are across We and building the Patterson

quarter. proposition approach value and Our the execution focused line improve and to delivered expansion and disciplined in our both improved growth margin top strengthen

with several begin a Let me key summary highlights. of

year-over-year grew internal X.X%. First, sales Patterson by

also expanded margin operating operating by of basis X.X%. our a XX adjusted We margins consolidated points, generating

In our grew Dental X%, Animal grew of X growth sales in sales internal all segment Health categories, revenues our X.X%. resulting segment, and across

And per raising to of improvement per prior we share. $X.XX as and our to XXXX Our of the strong results, delivered adjusted range in guidance result top quarter. the range of adjusted to are a per growth diluted $X.XX $X.XX earnings fiscal diluted margin earnings financial improved share $X.XX from line share our $X.XX

improved been high growth in our rates let in The customer investments strategic from value in in in partners mind, customer driven we more making including segment our our internal quarter Patterson's value sourcing. highlights operational the continued of our proposition, by satisfaction focus, X.X% and result third a of those the quarter mix, of teams. dive additional with point quarter me of was and of our expense basis working XX now manufacturing excellence, segments adjusted continued through service number margin management improvement and factors, disciplined both is and the operating delivered strong drive product sales benefits With focus year-over-year into sales field on in our in the we've detail. the

mix from and continued from label and perspective, including growth segment, benefited higher-margin portfolio a margin in From private our our categories. our performance our consumables services value-added Dental strong

the Additionally, the contributed corporate and year. sales strong XXXX equipment segment, quarter. reported quarter primarily enhanced to performance a margin as of revenue deliver as growth combination XX% resulted performance progress financing our and our shareholders. of results Dental our value expansion customer to prior by but during offering, improved X-year in which diluted also our technology improved great to revenue is in segment, made representing margin driven in the in adjusted accelerate our our earnings share for part of We've increase our fiscal $X.XX, per over plan This throughout

segments, each I'll with our our Now of to starting turn business. Dental

continued double-digit our growth in notably, growth Dental X% in category sales, period, equipment year consumables sales Our prior segment to value-added internal in by segment. over increased and, a driven return strong growth the services our

X% Dental marks category quarter. quarter of first the an as growth important This consumables positive business is in fiscal Our since milestone this of consumables positive dental XXXX. growth delivered the early for our

sales of and our investments their to to tools Our making the and improving sales in build productivity provide is consistently we've trend long-term consumables organization to enhance result execution. help the been

customer Our very delivering important independent dental and strong this as regional proposition DSOs. national broad category our focused practices, value is our encouraging we remain base performance in of to on quarterly

quarter, delivered categories. category growing in internal led increases Our equipment and digital very another with CAD/CAM double-digit by sales strong XX%, the

effectively driven was executed. innovation product new manufacturer to Our we and performance in promoted of ability which introductions, categories and take advantage by Patterson's strategic these

can of product other impact programs quarter-to-quarter. new introductions, promotional and communicated the certainly we've equipment As from factors our business previously, timing

our Patterson dental the practices is However, the choice to results introduced market. that for new clearly is partner when illustrate innovation of

and and cycle and equipment practice our equipment technology purchase Patterson integration the proposition Our dental they for that life financing, our technology partner training helps is investment their the investments. selection support and to customers support, they and unique them achieve are their value the confident cycle installation, right product customers From return of entire the for the of to comprehensive complete on for expect software life needs.

In our support growth and repair services helped labor, our nearly Dental our technical equipment for further business. value-added services demand X% how drive illustrating recurring category, addition, in our for generate revenues increased sales higher-margin

Center Our delivering essential up our and dental for true responsive the from teamed a ecosystem we our value technology service experienced customers, believe customers. support proposition to Patterson support this and technicians the our to Patterson local provide with and and comprehensive national is for advantage Technology our

with team's as serves pursue strategic their progress where relationships help the comprehensive Patterson efforts enable to growth DSO our customers with pleased also are We a and success. to of and partner

multiyear in Pacific category, privileged agreement we DSOs Dental products third quarter, Services, dental the comprehensive many look in technology, the their related country. that and and partnered We for a premier supplies, the and of are we offering now one equipment technology supporting During Dental expanded years with the to with forward with and signed includes and Pacific organization services.

any with forward. third in While relationship the our performance growing look have relationship expanded to we did financial going impact on our quarter, significant this forward Pacific not

categories quarter differentiated to and generate capitalize want our consumables, organizations we and business, as new for the sales field to positive continue of services, X and continue and dental Patterson value equipment of tangible to Patterson's as to remain customers accelerate on in proposition. the our well growth service innovation with the our across believe We performance of introduction congratulate the stable all that returns to serves fundamentals, and our value-added end I confident team Dental strong positioned we market. a as and market investments the are the see experience delivered they underlying dental we benefit

animal veterinarians as third to build continued business particularly the of sales is continue X.X%, preferences growth business trends our in growth believe business growth third Health. the that In despite generally is the some improving markets. global in line stronger they of business in our delivered market value the to challenges owners, connection in and our The proposition, supporting our as beef quarter, function with dairy compelling Animal Health ongoing generated a in a quarter dynamics Patterson Animal top ability production and to the deliver with Turning we of line with and end companion continued in now on market. consumer trend our performance evolve. a positive pet companion work focused broader to internal

the practice. of with need trusted prescription grow technologies medications, services Our be owner changing also veterinarian comprehensive field deep customers does pet of that their help only cultivate Patterson veterinarians customers. and them our Not who sales products to teams and broad include their the provide today's array to relationships unique partner demands Patterson meet offerings consider to a our their

communicate products for with practices practice mobile veterinary pet with their build owners. more support to help we example, branded For proactively that apps them

their facilitate electronic also prescriptions and home of We ScriptRight Vetsource delivery platform our with for prescriptions. through partnership

long-term owners for differentiate and as Additionally, our their practice allows veterinary accretive at is serve veterinarians to these management forefront an for to business helping margins today's integrate with practices individual and group These to veterinary our and NaVetor drive a practice. and technologies. how or practice evolve Patterson tools pet manage continued Patterson technology customers. are examples cloud-based success the offerings new partner effectively demonstrate These our software of

their to services. team's help grow, veterinarians lasting As spending to our pet relationships products level and for provide animal with companion pets to build macro demand and customers drive our further to ownership will continues trusted care on exceptional their a we focus believe and

through softness executed and in drive swine markets. In teams animal managing end the business, the to also production market continued well the some our beef improved while dairy performance in

to we in strong proposition, is relationships, global drive optimized due to as unique chain. value customer the supply swine the We performance and demand growing for offerings strength continues pork believe grow. customized market Our sales deep can our

for have signs overall While in cattle we us food market, the are value our animal to improvement impacting in capitalize markets the proposition dairy changing likely consumer demand some products, improve. well and of positions beef continue preferences space as to seen

protect our that and in partner. us biosecurity address our and a highly models valued their makes the is Animal Health to herds. to increasingly One concerns, has our customers to Patterson again, business important health aspect Animal customized the of production the business capabilities of to assist which, prevention expertise infrastructure, disease Health alleviate customers is delivery help focus their the provide animal to

to the Don, wanted the troubling Before evolving over I across and the obviously is I issue, turn coronavirus touch on globe. which development call a still briefly to

in and increased not third seen control While business we protective financial significant certain demand trends did on our have quarter. the products, these impact infection a for some have

period. and with we ensure to our our are providing More importantly, this customers need we of our their working are critical meeting local committed effectively manufacturing the customers needs authorities products and with communities to closely they and partners during the

of quarter. contributed strong both businesses summary, to our In our

We are stable confident deliver profitability. that value we revenue and that markets continues end our and in in proposition to operate growth

XXXX quarter for third on results deliver and fiscal financial enhanced demonstrate delivering Our improved to while are that goal performance accelerated of value track returns for we our customers shareholders. our our

dive And deeper turn results. over to with I'll into now the a our Don financial that, for call

Donald Zurbay

Thank also third quarter Internal a our you, Companies increased morning, everyone. an product translation sales Patterson in compared adjusted of effects $X.XX were XXXX X.X% are changes the quarter billion, to selling for year Mark, fiscal period and year. ago. relationships, reported which and the increase Consolidated of sales, last third for in X.X% the currency good same versus

versus quarter XXXX. third of was which XX.X%, flat quarter was adjusted margin the Our fiscal gross third

were sales net higher a XX.X% the of sales expense operating expenses points percentage over for primarily the continued our a leveraging as and volume. related disciplined quarter to favorable basis, basis third on impact by and management expenses of year-over-year operating XX Adjusted

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

represents margin which In the same XX over improvement point the basis a adjusted year. period our in operating quarter, third consolidated prior was the X.X%,

leveraging Patterson's and Our higher to improvements sales improve, expense added has operating and volume. primarily mix consolidated margin segment drive operational this to impact discipline of margin the and efforts adjusted of and the continued result momentum is

by encouraged the margin our over continued We X quarters. last operating the progression are adjusted of

or This Reported net tax per and to compares Inc., Companies, Inc. costs integration million fiscal income quarter $X.XX attributable our and for equipment of increase the year all totaled This legal third reserve or million X Patterson income excludes XX% comparable profit $XX.X the compares $XX.X a reflects increase $XX.X consumables, discrete quarter continued the in to amortization diluted Dental $XX.X expenses, share share. and matters, services, net or third to diluted in of million which XXXX. across -- or operating primarily $X.XX XXXX. segment improvement $X.XX categories, diluted attributable third represents ago. per of $X.XX XXXX was Patterson over quarter $X.XX This This expenses, of sales accelerated quarter performance costs, X period value-added the and the deal in Companies, business million restructuring to debt-related share. our margin. and per the Adjusted adjusted

year fiscal ago, the first categories. growth turn market. let's of fiscal double-digit X.X% the delivered segments. quarter business quarter positive we've This to time On of just our same sales internal XX% dental since XXXX. by and Patterson the of Dental first compared that over in Now to Internal consumable sales quarter our CAD/CAM the sales supplies in X% third increased versus the percentage of increased represents In increases led X.X% in internal same supplies equipment digital were up a business, dental the U.S. XXXX. and period sales the of consumable basis,

the market and timing manufacturer-run As we on can factors. promotions, and fluctuate of other quarter-to-quarter products have previously for stated, equipment new technology based release from schedules the the

and whenever new life continue of cycle partner full-service model is introduced. for on practices our to We of as innovation the choice capitalize dental the strength complete

the label and Adjusted consumables of equipment was offset products. margin the certain improved prior the X.X% of impact to in higher operating in private This decrease partially inventory, basis product margin mix year-over-year the the and of equipment margins year. decline result sales Dental of operating the impact point write-off margin XX aged in increasing positive gross were quarter, our third business a by compared

their a one item the offer manage important life is to highlight this service, we There's and segment. value-added the from here, profit how an is them other reported want our important value-added corporate and Historically, is purchases. help as which of equipment equipment entire of part our the I financing cycle that customers to offering within revenue significant we

value-added a in over This the contributed contributed business margin quarter, quarter of financing last points XX operating additional as year. service financing Dental have basis to the third would what of

let's Now period sales the compared business X.X% ago. on Internal business. for Animal year the to Animal to Health a increased move same our Health

revenue end As the production Mark mentioned companion in continued growth his in trends are challenges business in in beef our remarks, and our despite we the believe business delivered dairy markets. and animal improving

X.X% slight in XX Health operating margins the the of compared prior of third quarter Animal in to a Adjusted basis our were segment third the decrease quarter, points year.

historical Animal look this the and If margins you'll our operating segment. third categories animal Animal Health companion you impacted at by of animal be our across Health the operating margins find of seasonality can a production both basis, on quarter our business

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

see cash continued have strengthen results. working we improve Patterson's actions our and sheet, balance our We taking overall to pleased capital, and our to are increase impact flow on the

XXXX, fiscal of months have activities. X in operating first the from we cash $XXX used During million

which the million, our Activities of Investing receivables price also cash included $XXX these appreciate total is $XXX have purchase amounts of To X cash free flow section statement. million. the deferred fully flow, is We collected of the in

press which within the flow, months cash level level higher decreased is with in fiscal first of of the timing inventory. first million months to prior and related of has of slightly have Free table release, to year. year-over-year the we XXXX during a primarily explained of of compared calculated X much conversion cash the the the along to sales $XX decrease financing X due The equipment higher our

revolving of our by entering term of committed funds our this million To purchase placement During line quarter, to a from and to we our agreement. the fund retirement, optimize steps cancel credit into debt. new credit we private loan and existing debt used debt under third took agreements structure $XXX

allocation. capital to Turning

have fiscal continued our as back basis, $XX to We shareholders million the returned dividend shareholders we shareholders. to date year-to-year in our And we execute a our return In on payments. dividends. strategy form of the $XX.X cash to quarter million returned on to third to our XXXX, of

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

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

Given $X.XX now XXXX, improved to fiscal our through of of GAAP X diluted the to months $X.XX be we first share. earnings the performance range expect in per

XXXX For $X.XX per of our raising the fiscal to range adjusted to share compared prior diluted $X.XX to to $X.XX share. diluted adjusted EPS, our are per we earnings range again guidance $X.XX

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

Mark Walchirk

Don. Thanks,

opening a questions. briefly before Let comments with closing up me now up your call wrap the to few

the with remainder first on our are encouraged fiscal performance very momentum quarters and XXXX, our continuing are year. X of we the through fiscal focused we through First, of our

you accelerating XXXX core the fiscal As is year clear after the fiscal with stabilizing focus recall, on X-year in plan, financial a performance our our second of business XXXX.

expect Looking we accretive exploring include our in consider in ahead focus categories, while value to investments deeper level, our Patterson a our for continue new some may to to of opportunities targeted XXXX, high core further new and on success. M&A. to this fiscal expanding segments, partnerships long-term services position customer enter At capabilities and grow in invest to business

and want value X-year to for to and Before on focus hard enhanced our their and and we confident passion continue right plan thank to that team we to conclude, customers, and to their work strategy right the and entire team business value delivering business dedication have partners. for our our the customers the shareholders. I'm drive Patterson I partners executing

up we Don the I questions. take your open line now will Operator? with and And can that, so

Operator

Instructions]. [Operator

Your from from Erin of is first Suisse. question the Wright Crédit line

Erin Wright

Great.

driving versus improvement? of sort seeing of were gains I'm much dental some cohort market down of be would all the share great. curious you was underlying latest pricing break you any behavior in market And can front, independent change what terms consumables components in was How amongst dynamics? your That it versus at practice dental volume improvement? the the On of of

Mark Walchirk

Erin, Yes. thanks. This Mark. is

in from results I mentioned, investments consistent had overall sales satisfaction, years. think our we've customers in the on Patterson our -- things as key see been that indicated, all in think, excellence that of things over that starting see our tools, a We the operational We we've building a dental certainly, productivity certainly, of quarter stable and of I proposition really see pay consumables I And We're private fundamentals. think are those field as DSOs. and are focused all of couple made practice, customer our customers that driving market the in focus results do a I value that certainly, some and investments the out with to segment. last organization, segments, Dental X making consistent the across the key national reflection I on really regional really and positive number supporting we've off. improved

And the think there's consumables. that so particular generated X% I thing don't in really one growth in

investments I trend. this that think it's focus had on the a keen and result we've we've that made real of

Donald Zurbay

Yes. were in business margins is Erin, add slightly up our to consumables want thing I gross to just this Don. one year-over-year.

quarter, So one of concluded. on that the the been was Pacific just contract talked impact in side, the revenue quarter a the that's we significant thing then about no notable quarter. Dental that really in million had $X.X And than the to item less consumable other

Erin Wright

been terms into benefit incorporated distributor transaction meaningful as sort And companion to the vendor at Have Health is helpful. terms that in you well? that's animal on actually point? any the incorporated your your And of that on speak you of there in taking this how changes guidance Do relationships? pending that's you're side, Animal you the consolidation of then should of much bear into their Elanco's front? And share guidance Okay, think business? can relationships

Mark Walchirk

the of line Yes, in pleased We're our market. growing thanks. with Look, with I'm the excuse really companion business. -- results right me,

continue business I the to their you really certainly, We for out if really think of a in about manufacturer the teams and companion We technology specific really there customers. our of how will. the wouldn't as forward. really to with customers, up, to pet partner our innovation the channel the are on our think We jointly tools to very and ownership segment, of well certainly, still standpoint, continue can veterinarian ecosystem. to market. parents, build customers grow a with real showing efficiency value for our think value actively, take that a to that's relationship veterinary supply that proposition customers, as very our relationships with veterinary and of from on focused vet bring being manufacturers business. engage I our customers And chain the market, value across manufacturers new crucial obviously, that Animal see, trusted to And pet great we're to enhance continue there, directly comment we the And and and the them obviously, as help continuing look part results part advantage I proposition. view that talk certainly, really enabling key our Health the support solutions going bring we our relationships. to positioned

Operator

the next from Johnson Jeff comes question Baird. of Your from line

Jeffrey Johnson

hear you okay? Can me

Mark Walchirk

Thanks, Yes. Jeff.

Jeffrey Johnson

on the Congratulations quarter. Great.

and a dental couple vet So one question. then questions

over next go? point the if to side, digits of Would for yours years? little could we topics. of the XX%, question. share think interested large On be those of few maybe XX%. years? north in think yours outlook side, is on be a a over your the do several look would kind the I and And on then today of your your think of part the the Where mid- business maybe be both percentage the percentage may Where some it peers, We of do hear similar double Where today? around at you low the or of label Dental just that could consumables. is where this private kind as next a here interested the peg DSOs you DSO go at ballpark

Mark Walchirk

last underpenetrated. over a penetration. these investing have of And spoken are both we on maybe quarters, characterize areas places, of frankly, would been I that improve expect number as areas bit the in, that we thanks. calls Jeff, historically we to our and those X Yes. we've as

than private So label our our we specifically consumables faster private overall business. label, around business continue grow to

continue make in We different at see selection have sure complete lot product practices. that for value that, obviously, they creates their ways customers want and a looking and to are, of that a our to comprehensive

and have opportunities to also introduce launch private products. new We label

not So growth with portfolio, improve but only we time. can penetration portfolio our we which expect expand drive also our would would over existing

And historically, We've my I think kind over focused Patterson nationally, products would in and Pacific the years. opportunity label, an penetration DSO market the it to Dental comments that think we'd the the again, expect again, of of last And made forward. that. is can DSO I case value of and and We're value that and But services on the where, be the for space entire certainly, with same clear support be a similar see in that the regional on across our and Patterson for well there. And fit that the going private was portfolio also regionally growth great underpenetrated example of investing space. very DSOs, couple about focused provide. to obviously, we're proposition on us both finding

Jeffrey Johnson

are production especially side market, history the on great. some and parts don't going depending there's had view outlook past. remarks, there beef I seems -- a in your of though right, secular your of between of point, for the on things I in vet business, on the even X- view. there long-range some the if love maybe cyclicality on well. it a to the going seen you'd And All consumption. prepared a like on companion -- in a but X-year we've animal, kind in as just of hear put then To or changes to side obviously dairy, that out know secular some protein But I'd think

you can conceptually, Just business it years? Can digits? thinking how grow to do Health should the Just low digits? Animal and mid-single get that? back it combined over be think where Is companion about the next single we several production

Mark Walchirk

segments. our in going swine thanks. Yes, think growth take to factors within I outlined the on We've beef overall challenges, there. the strong are a Animal number business X Look, believe you within some we're dairy frankly, cattle of and of certainly share and seen good, actually seeing Health continuing each We markets. category. that the in We're

maybe is showing beef signs. think positive some I

be -- continue dairy to be challenged. I think to going certainly is

term. as as to is just growth. at the pet of reinforce, feed the and increase, we growth. veterinarian of term, Certainly, so animal, animal to I I those to that continues low market type that global to ownership would long-term certainly innovation again, expect to low protein. of manufacturers pet believe mid-, that long-term growing and rate market mid-single-digit long mid-single-digit are fundamentals companion for as growth think the in kind -- in companion we segment, mentioned, that And the similar of strong space, And the driven to drive ownership, the I to demand by in companion that, think numbers over And certainly, drive underlying really continue say low the supported center driven just the providing fundamentals care in animal pets. long we and, to And

Operator

Kreger next line William Your the of from question comes from Blair. John

John Kreger

you Mark, right just for a up down Animal question, us following side couple on what about be production? for companion strokes, on Would Jeff's the give maybe production quarter? versus percentage of this you can broad points Health did in

Mark Walchirk

Yes.

a lower I than production. in growth in that certainly think, X.X%, certainly, bit higher and that overall than about companion obviously,

reflected accurate. pretty you numbers those think I are So

John Kreger

growing? give to all Can pretty a Great. categories three consistent you flipping then the us over outliers? are any sense business privates, thinking Are sort you and about three? are And national about mentioned of Dental, DSOs. in there regionals you across those seeing how three Or growth buckets,

Mark Walchirk

our customer all and practice private growing So three our suggest in building quarter. healthy categories, see the market. all quarter. of X we what if segment think I part results to out big proposition supporting I third in Certainly, we're practice and would in value very categories. the nationals, investing faster able support, regional DSO I was did the are focused deliver think than and certainly, the and And combine results around we're market, would on growth that certainly, that the private be our We from a the consumables you

some growing So within we're think, base, X and faster customer DSOs, segments there's of I different all but elements are to invest certainly, than continuing portions. private practice, the the in certainly,

another would practice, think in say look I as at really and our spoken their pleased which building making private our to that with suggests And for yet, much our a in we practices have in had And going that there. are equipment And investments with in around also I equipment very very really haven't the obviously too that private out you customers there. strong private practices results that business long-term of prospects their us growth practices. some component the technology, practice certainly, private strong the gives practice forward. another confidence me quarter confidence quarter we

John Kreger

helpful. Very

Don. one, last one Just

rolls growth expect As many would Pacific you from next relationship? give basis you about that how into points the fully in can a quarter, us lift sense

Donald Zurbay

to appreciate level question, we're -- that into get We're going Yes, John. not the not of detail.

Operator

line Cherny the America. from comes from question Bank Michael next of of Your

Michael Cherny

here time much too spent hadn't you on equipment. mentioned you Mark,

So maybe I'll there. start

if you than of these terms introductions about when seems get various customer base, that likelihood guess, in think different more spend recent especially are all come more of like your they're price as being from lot looking about points of a equivalent from in points talking more buy price you market, equipment. price cheaper there's I'm less? it to total some bifurcation on typical not products, investment feedback being but still what's some willing the the market willing the lower per in been and with made, to have equipment. because better there's an customers As more of to spend the lower -- the less innovation, to I a the product less actually come of get is spend or to the more offered

Mark Walchirk

fundamentals characterize I of I interesting another. really I don't dynamics there's Well, here entire that think, are could think, Michael, in in play, or the Look, probably mean, know I an lot one it's bucket important. question. you I the base customer think, and a

we really up not Dental new As to this market manufacturers trailing advantage bring our basis, us. here. their is I only really results, and believe about, to XX-month And equipment good growth look over pleased is continue productivity, last And care, as have this patient we're formula quarters. continue improve in a overall about that a we've dental but XX%. with drive on spoken quarter, the competitive products our we really improve frankly, launch And if you practices, to a innovation customers for our think help the several

for truly marketplace. but innovation I this We It's think, great products customers. are range the and we to support valued services is wide our obviously sell them, in the Patterson. also for So a that, great provide of

Patterson many category think I So products, of again, that. making while different types cases the investments whatever the price for there to that are in execute area with may we're the different by are customers partnering be, think their and here that points I help practices, our fundamental encouraged in is

Michael Cherny

question. more one just then And

are You sales efficiency, you a that versus about -- -- tools or effective. to go that Mark, some what since additional are to with market salesperson components salesperson force has -- talked the at think to you the him as point make maybe, today the what company, joined her the on additional more back of

Mark Walchirk

in do think that sales I reps improve their that of CRM manage help organizations think it through at the that of implementation things. really one spoke, territory I as type ERP years level our obviously, several is couple particular, a a system a a comprehensive certainly, analytics we Yes, company of helps the And territories. benefits that better couple just major for one, our ago. of a the went Number elements, field really

generation as secondly, a of each and we have analytical enhancement way are think, beneficial deeper, that, of helping a implemented of would for lead view kind which practice. their out building -- to reps are tool, opportunities their help going in identifying and understand serve them in on up what's really, again, that each customers opportunities to their growth I and our customer using and with to more

good fantastic the et sales really customers. tools obviously So for driven street. generation, those aggressively, productivity customer have cetera, Net our really help obviously that gains driven across folks a through more Number one, providing. adding the feet us that's analytics, combination dental things we've that the of seen company we've results and a We're far. Promoter We have several I we're with been in with of think their to reps and some And improvements lead that so productivity. a question, their core training that your the we're We've relationships Scores, tenured group on very great experienced satisfaction invested formula it's seen. in great seeing have service specific some in of again, to and

Operator

comes line Santangelo question of Guggenheim. next Your from from Glen the

Glen Santangelo

equipment I on to were obviously, a categories. digital Mark, than all And much maybe I how highlighted for overall us in was other think result maybe the expecting. strong of the this the basic in end and sense high-tech in remarks better mean, we prepared you could just you think and I versus category I in us But -- follow-up side. want about growth a general equipment think give growth can for for general? so demand CAD/CAM market

Mark Walchirk

unlimited Certainly, driver their are performed the that the our Yes. equipment although in our don't really, "core came about customers in also as Look, the business" primary Thanks, from, investments technology-related Glen. quarter -- customers obviously I they're our products, the thinking the equipment think of funds. our well making have higher growth practice.

return put certainly places as are they them technology really we're get a for that marketplace thinking invest introduced practice. their the into where their -- in them investment, So good about great as and being the look in at they're advancements seeing for to

seeing the that slowdown suggest area. wouldn't we're equipment I kind any So core in of

results there. with We are our pleased really

our We to the that of to CAD/CAM the the question, components, particular, certainly, But equipment in main drivers expect technology your were continue. results quarter. in

Glen Santangelo

Maybe on ask follow-up I margins. a just the

things help assess these did contribution drivers the your about different the XQ the trend us of strategic cost prepared into including look year? of product to you we Can the as of sourcing, side. and that on next You margin remarks, of highlighted you some think things mix, better sustainability to a in number help us

Mark Walchirk

smaller going margin. obviously, sure what pieces, don't the also focused I'm say over we're would the growth I can We're are obviously time. Glen, improvement to able going down Yes, drive sure. quarter. elements an is, you to and as and margin it to, growth, And margin I think for That's we're we're But focused in improvement in on performance we're drive understand. that our important focused various of on element break on

our a margins to to growing be structure, focus kind but our consumables about focus to our overall. of our Certainly, business business or mix portion continue excellence, operational improve on continue cost favorable segment on product disciplined to continue So drives not only ways of a mix.

areas So expect and focus, margin. to focus all of we are continue on elements these of to

Donald Zurbay

add. Yes. I'll maybe Glen, And just

I think little can here, cadence and just previous if hint kind see of that you a margin of the you quarters give sustainability. may a of look bit X you back the over our the on

hopper put really I broad-based. and here of over it think not all of X-quarter item. It's of you're events. results this period. the is onetime one is kind in a the It's not seeing sort this Really, really

Operator

UBS. comes the from Kevin question next Caliendo Your line from of

Kevin Caliendo

bit. to the Dental want a little just margin get into I

basis of shift it mentioned year-over-year, XX the was by bps caused equipment was to You the of that points VAS. down XX financing

it still margins gross the So that you were margins in margins mix operating issue was points Is talk more trend? about a within is operating XX the simply basis general little are a the and grew and specifically consumables down bit equipment, Or yet consumables the means lower in faster? margins just higher. that can decline equipment

Donald Zurbay

Don. Yes, this is

equipment one corporate just are the still segment. So financing to thing margins up. The clear in

on So clear have right, that. may worded we're not just quite been that so just but

But to I margins So were highlight there was consumer the a up. XX that basis point wanted decline in Dental margins.

is of yes, -- some our write-off we piece the equipment mix have offset that. other in and and then significant just did did not equipment, equipment The quarter in older overly the some the really, portfolio we some that

Kevin Caliendo

sort virus. fiscal China, quick impact the any I Chinese demand update in XQ. all? And helpful. mean that in a one is just we're have But your appreciate at you impact follow-up. all likely globally That's on most the We seen but coronavirus Dental on is fourth in pass the Dental government as quarter the service focused out called of has the the to and

And in so globally? you're was any into demand wondering and the just like February I seeing slowdown if

Mark Walchirk

closely. no, access Dental our Obviously, not, working segment we're demand with this to Yes, I ensure seen our we've manufacturer to seen result in mentioned, and point, implications this And partners authorities, at supply local at any Kevin, the we as any from a as chain But have to a demand slowdown point. standpoint. it of question, watching customers in not your just coronavirus. and we're specific

Kevin Caliendo

really I guess, to that. one quick follow-up

raw supply the materials, how chain, much from your On any comes China? of supply, anything equipment of

Mark Walchirk

an that so. general private certainly, sundries some label Well, I'm sure. my products But But label to in China. from really, primarily got products knowledge, private there. that believe manufactured equipment manufactured Certainly, don't exactly area, are the are in some the consumables not raw of merchandise you've standpoint, -- I purchase we material

Operator

of comes Sachs. Goldman question line from Nathan next from the Your Rich

Nathan Rich

year you're X-year our a at of approaching level, kind high starting of plan. strategic final just Mark, the

the as highlighted starting here, the guess how you're you've as business from longer improvement to operating that we think see we kind about margins. with place obviously look improvement put the forward together a you trajectory term? Dental, you initiatives the I bit in of see You've seen of do in little coming the

Mark Walchirk

to spoken how year year we're trying year to year thinking Certainly, X thanks. expand. and achieve the momentum place to on well Nathan, Yes, and business; in that goals; the stabilize and as about X, this think accelerating certainly, and core to X X on X-year we X plan, performance build continue our about we've really year I

top our going build I out our certainly One, the about continue that the FY And proposition margin, this to think we've cost, to probably business so in to that a core things establish and 'XX our to few we're key and supports to we're spoken customers as growth, build et margin cetera. things. focus, beyond invest line at on really point, and continue that of, starting momentum value

good really strides. making we're certainly, Secondly,

grew, That in services quarter. value-added talked approximately about our category. X% think, of I haven't the kind and We

are to invest revenues, service our great as business service M&A as us, that margin such to would and build margin and expand accretion to identify tech Those our service. They and on areas, appropriate those third, in. great continue growth, and, opportunities continues to think, that generate, we'll sheet to balance customers. proposition again, certainly value drive for value And our recurring a for also accretive are development So customers. again, enhance software, but and areas continue accretive bringing our I the improve, upon certainly,

we're get work we work So around variety We'll would opportunities. of into how put allocation any certainly, capital approach. capital what But supporting capital to existing specifics a that be -- may while very you're about thoughtful certainly at not really additional be. looking further going to certainly our

be the strong. now, thinking to gives of certainly, we're and and year about. you types right thinking FY on the things hopefully, a obviously, -- that that 'XX we're So little about beyond. we'd color But finish focused we're Nathan, down head And thinking

Nathan Rich

And quick Dental that. Mark, the on follow-up a appreciate just business. equipment

you have the seen what placements of places after you and With see you between the high-tech of kind revenue? consumables the -- a typically categories remind that relationship side, of side on historical in place CAD/CAM digital and a tail Do on equipment? equipment strong you piece us sort can like placements a or the guys consumable benefit

Mark Walchirk

directly it the to X correlate I think hard would Well, be necessarily.

helping think value helping and about the penetrate with we're way further is, their great have I in we certainly to productivity that position that that ensure bringing they products put important and get services it the us make we that certainly a helping customers. them, those return our investments to investment on additional we're we're I think support customers, we're them think really decisions,

customers that's being well, our in focused us very consumables services for to focused category. of positive on on bring very business certainly across margin equipment and category, we're technology categories the as very of the believe that we continue our And are and we accretive again, approach. value-added both trusted terms value equipment which We're So to as partner. that a comprehensive to

Operator

Your Elizabeth question the ISI. comes of from Evercore Anderson line next from

Elizabeth Anderson

of DSO one going you know, terms I guys your of only something having quarter. Congrats into obviously book pushed -- of are like that of we Or 'XX, DSO renewals business not the generally that's rest 'XX current and there, like, guys in good DSO just attractive know and partners any beyond have on that business is be for for of that business question. you after the to fiscal a but sort I and are the more horizon wanted looking should this sort I mean I of? on aware out there?

Mark Walchirk

value Certainly, extend in area, lines pleased out with to thanks. obviously, that this up the Elizabeth, and bringing DSO the continuing ongoing as and the key we teams these in with renewal talk in continue build capabilities with the we place believe in in expand about And our very pleased investments there's these that our when value a our process and customers. certainly, we're key we're specifically customers. making time in for relationships. on Yes, that very invest and support we're you've pleased with there, We our position also indicated, focused great we're don't focused build so on again, market. we're improved We're to to have we're on And DSO with do relationships an come Patterson. to see renewal, that and and relationships customers performance

Elizabeth Anderson

other programs manufacturers see loyalty the it you to had it partners Okay. of Perfect. recent wanted of and of of there had I changed them know seen because in That's have that some very working of an in see could yours neutral months, question -- terms I and their or negative. attribute as positively very you could impact sort you sort if are to of to some could helpful. -- some just I And key guys

just wanted what you're better I seeing So from to sense there? of get a

Mark Walchirk

a as positive. thanks. Yes, that We see certainly

wallet that for really think chain. continue manufacturing of supply build increase or the and of In with Patterson share partners, key our their some key with our throughout relationships customers with everyone their I fact, with of Patterson or some partners on as to bodes well

invest any and and those way relaunched We last in growth also We're some are don't competitive on focused continuing And there. in programs. -- programs. as loyalty progress excuse back loyalty our We we we're our view making in great with our seeing me, it great manufacturers. early to year very grow of

see manufacturing that a our continuing of So to for our drive look with to we we both forward partners positive, products. and as work closely to key growth

Operator

the from Stifel. of line comes question Block from next Your Jon

Jonathan Block

quarter. broad-based Nice guys. quarter, Nice Great.

company's internal going results OP were despite So And congrats. sort guess, is first compression margins surprised of one that I'm was segment see with where the or is, I just the margin how I guess I to expectations? by growth. Don, solid relative the to segment the

if played out just how maybe that can on So expectations? your comment you versus

Donald Zurbay

I -- was expectations. Well, think you to pretty it I if our close at mean the look

I I think we mentioned, some as did the older have write-down equipment. for Dental some margin, equipment

So you performed right that that necessarily that, then was of Dental beyond with in was But kind line way not think the what Health I our look and in internal if Animal expectation. the rest of we segment, at margins the the thought.

Jonathan Block

a it in EBIT Maybe I'm in correct? million-ish were EBIT dollars, at loss came and less differently, Dental that would, flat ask Animal the Okay. Health maybe and Is for sort of year-over-year, increase non-GAAP a $X you all follow-up, corporate. level, as correct, just if of the essentially, to from curious

Donald Zurbay

into into X at Yes, break really that's look that, you pieces. accurate. if that you could And

financing it's equipment higher think equipment impact half the of I kind of sales.

the Dental that given just to probably reduction And corporate segment our that then of in could you part the and we to in -- will, other P&L. expenses, work all have our so, place really attribute on that is the in if of that a you half really programs to continue as

Jonathan Block

color. go? to just would Dental was closer there your traditional to it, That's number high-tech? with I year? X to Is we out versus for the That's equipment the And give a XX% call Are it think is updated just what guess, helpful. for XX% think be, very an how And about initial, it, XX%? rate question to you quarter is XX-XX-ish? lastly, then the breaks it tax I Don, great weightings us of can within broad-based Or second maybe equipment?

Mark Walchirk

won't really to to the wouldn't out equipment, regard With that more specifically. -- break want

So thanks for not of into the get level question, that but detail. just to going

Donald Zurbay

the second say number, would that's XX% if the start want more probably positioning yes, I toward most to accurate. question, And yourself on you

Operator

comes from Barclays. question the from Valiquette final of Your line Steven

Steven Valiquette

One little underlying of have there might growth within patient your perhaps blocks dental it's to was consumables visibility of I dental is differently, it on couple bit questions directly state minutes in volume strength just my any I primary volume and sales the or growth? equipment to curious, placements to like placements? But build just that your XQ of Whether guess, you the fiscal consumables the a much ago. patient was over related a that, on dynamics currently consumable may is a asked growth how tied have inventory other the to of to underlying be chair-side versus been that related related bolus new CAD/CAM customers above

Mark Walchirk

it that second there. to wouldn't the I related Steven, suggest No, was element

I they would builds think certainly, or we're characterize -- an products certainly mentioned, the And equipment in market positive, by wouldn't inventory our that purchased I stable or seeing steady results quarter we're fundamentals. dental investment. with customers as long-term in regard to part specific and advance a with as have consumables of I

building I out teams. our the customer continuing across about, result sales our improvements field solid it's of and that talking to drive think organization, experience been direct So in we've just execution the a things

Steven Valiquette

little a just is this bit, on quickly, directly. just to And touched Okay. also little more a but tackle

one this was witnessing reported observation results. end largest it comment you're particular, seems to distribution in trend independent market One mean, like by definitely on your your at topic related dental same you cited that of about I'm curious based industry able some to on your demand soft competitors But did least if not talk competitors? just of we're since that practitioners, larger

Mark Walchirk

above growth we're is dental to think in market, going indicated, positive I on comment would throughout value stable the competitive U.S. to the our our fundamentals, business. market consumables steady we've in was focused are certainly what in fact, we're bring the X% others quarter believe we business business to our a and, suggest. not Look, specific as indicated in continuing and -- execute call, X% pleased the and that in in with on And slightly we're customers. the our market and and and with But consumables we're elements certainly

Operator

I closing Q&A. comments. turn call the presenters back the That concludes today's to for any

Mark Walchirk

everyone very fiscal And morning. much our to to look you on XXXX time your for hosting call wanted thank June. Just for your this Thanks in quarter we certainly, fourth time. forward earnings

Operator

everyone, you, concludes for joining. Thank That today's conference call.

You may disconnect. now

Patterson Companies (PDCO) 27 Feb 202020 Q3 Earnings call transcript