Earnings call transcript Q4 2023

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Operator

Hello and welcome to the Patterson Companies Inc., Fourth Quarter Fiscal 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]

I will now turn the conference over to John Wright, Vice President of Investor Relations. ahead. go Please

John Wright

Good in operator. full and you thank conference Thank Companies' morning, fiscal participating Patterson and XXXX for call. you, everyone, fourth year quarter

Zurbay, and Joining After Barry. your will of outlook Executive Patterson's open today and review Chief President results management, me Officer, Officer, are a Don questions. by and our Kevin the Patterson's Financial to Chief we call

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

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

net these to expense, taxes, fiscal GAAP for our A this before namely in morning's adjust tax fourth reconciliation in that we provided full-year income income, income, reference other measures, impact release per the adjusted donation investments note attributable legal deal Inc. of to inventory call, XXXX. is of reported items. reserves, expenses, press tax expense, operating Inc. income, share the Please income amortization, charges, will the our for quarter Patterson and conference related results earnings table on along and Companies net to with and integration restructuring Patterson net business Companies attributable effects diluted and income gains

as our contributions measure, and to the week use currency, flow a adjusted cash net impact free of from discuss acquisitions, of defined also the sales, release, which and is results recent exclude AM, to XXXX. are in of and of foreign extra the intended quarter earnings will GAAP This in internal one represent substitute the replay non-GAAP call be fiscal selling Central sales is measures term We for a for first a will not for Time period These at week. be results. XX:XX recorded starting being available to non-GAAP our

to I'd hand like call to the over Now, Don Zurbay.

Don Zurbay

Thanks, for value strong John, shareholders. everyone. financial including had we quarter our exceptionally goals customers and Patterson in and a morning, fiscal good and which year an achieved our fourth delivered

Patterson the expansion year-over-year operating adjusted and and X% the approximately On year. the the Animal segments. quarter for fourth the both for sales during increased internal fiscal margin margin fourth both X% X% operating We quarter approximately nearly our of business sales nearly including achieving year-over-year and overall, an segments for X% fiscal for Dental growth and Health delivered of adjusted across in year, increased top-line, in

quarter their delivered and work to culminated entire we are strong Patterson clear by the with making of continued customers, growth compared value an results drive prior diluted to and Our against demonstration form continues hard share record and share, cash of a the are proposition outstanding year. execution for grateful proud improvement, of to dividends XX% $XXX margin to XXXX fiscal EPS per plan. million the progress And in that repurchases. team I'm our our resonate dedication. strategic These X% year-over-year, enabled to increase of $X.XX shareholders performance during us we and XXXX return a fiscal fourth adjusted

into jump context. details step quarter, we back results like our the the in take to to I'd of put a Before

and creation. role and to of performance during the Patterson strong trajectory momentum the our Thanks we've I of leadership of strategy Patterson efforts position a fiscal of XXXX. early the was focused worked was that long-term company's rest more of years. months that XXXX been in the ago entire previous team Patterson delivered accelerate In objectives. team. a during building change At I Patterson on continuation these quarter as throughout CFO, my for closely I experiencing business, fiscal than including the time, reflected years the we performance several the our joined the with fourth the financial sustainable challenges results. develop five to Our value believe, areas, have to for several

fiscal we and from from in from to adjusted with XXXX X.X% increased of for we of to period fiscal per fiscal an billion by EPS sales share internal annual reported XXXX, margin sales improvement XXXX, XXXX of fiscal for an increased XX our net diluted in the improvement have fiscal with growth to $X.XX During XX%. increased XXXX annual with average basis fiscal adjusted $X.XX annual our X%, points, X.X% $X operating XXXX average average

The impressive Our of improving build that, that years including challenges working, given historic of posed we strategy, the pandemic and numbers and am is performance and to I and continually clear results And the over we confident combination a time. will the and the strategy factors. track are people, success. drive great its macroeconomic year-over-year have strong evidence key foundation financial the proven past our to other our from improved a is culture, with continue record is takeaway by particularly five

on of fourth path quarter segments some detail each sharing the before some growth drivers on the during in Now, perspective our the I'll ahead. more fiscal provide

quarter, sales across our start Let's value-added In Dental categories. consumables, X% service with the fourth including Dental. year-over-year, growth equipment, increased internal and segment

operating achieved margin quarter year. fourth for also in full the fiscal We year-over-year expansion and the

A few segment. Dental our specific highlights from

strength on comparison, fourth prior by tough a in First, the categories. equipment quarter sales driven were up equipment all XX% year across

results sales performance equipment timing provides quarterly our in the to trend widen factors previously, category. view fluctuate equipment due our the long-term influenced quarter-to-quarter strength sales, the that a discussed can clear this lens, of of of our when you but we've As

eight quarterly a X%, Over to in install finance, quarters, service technology that dental the and market evidence are new our growth their our practices to average sales value investing proposition is sell, equipment our customers testament capability last internal leading and and innovation.

over well, period. year infection experiencing our certain Second, to product our deflationary products of with non-infection Within still consumables for internal growth. portfolio sales continue we ago to control portfolio, are control the impact perform compared products X%

fiscal of the year. expect to the in half XXXX is impact this trend this second stabilize moderating, While we and in persist the

create e-services. category And growth added service a primarily strong third, value quarter, internal comprehensive to double provide offerings service, added we sales proposition, our These due technical to of value our and practice. digit represents are software fourth and achieved customers during customer suite enhanced our in that services to Value makes offerings their profitability. central to relationships an us performance partner the sticky indispensable

provide software operate These dental nerve patient of products experience. revenue practice, better cycle that e-services cloud-based and our and communication. suite customers and efficiently, are include center practice and truly solutions and on-premise management patient and of the a handle insights analytics products a comprehensive their A business to help scale everything from

expand are remains looking choice to in the practices. ensure Software of a our dentists this investment part to for Patterson going we their our and e-services of partner will key area and strategy modernize forward

service is and Additionally, We service turn our offering for from contributes offering to to believe higher our customers serve tactical their for allows and Patterson and leading is trust sales as for ensuring a both to our strong technical delivering their equipment practice. level. customers our benefits us a equipment advantage us competitive at our

following will benefit to health consistently as population, dental strong teams for commitment health proud including rebound from pandemic dental Looking that oral overall remains to an demand I'm the Dental levels. are traffic market confident link modernization, continue and of customers. practice a ahead, growing we ageing the healthy and a fundamentals, the from to appreciation our business for serving execution and our key strong

digits sales the primarily XXXX, growth achieved both fourth demonstrates to sustained fiscal approach. internal turn from In fourth our margin the companion business. increased our the in to increased This our now by Health, sales quarter and of of fiscal The value-added the quarter growth successful segment driven expansion for performance plan, execution year-over-year, sales consultative full in continue we sales quarter our X% animal outperform market. Health mid-single continued the as year. external fourth internal by teams, companion, also the discipline Let's and the Animal and in growing our healthy during excellent internal operational operating and including Animal a

herds from of year-over-year discussed these we and certain because side quarter internal our growth On that sales our a decreased well of delivered fourth pressure market digit impact wide the navigate for benefited different comprehensive offerings and on cycles the species. to pricing drought Patterson cattle range is internal the animal including animal previously. as omnichannel for presence. full solutions for low positioned headwinds, the Patterson impact market nearly customers of production single antibiotic Despite challenges across depth the fiscal diverse we've X% year, sales of

segment, and manage positioning their provides and during year, we insight, to fiscal strong provider Dental services veterinary sales customers. software a business, technology, attributed workflows. the double-digit execute on our data focused equipment software, delivered quarter largely Animal We our critical and to of Similar daily infrastructure as robust software health the category and Health service. products Patterson growth to animal them our value-added solutions full Across to portfolio industry. for Health of the remain the the Animal to leading our It with services, fourth offer

want focus As touch fiscal on forward. the to we key I few with our across areas momentum take to of minutes XXXX, a enter going business,

execute overall objectives. strategy, which achieve to core continue is designed We to four refine and our

drive growth end the First, growth above rates. rapid current market

performance. to Second, margin build progress we've made enhance our the upon

This our Third, and improve the targeted to continually best end fourth, and objective customers evolve on across cost well markets. our as entire efficiency services enterprise. best focus practices serve optimization. And investments a in leverage advance the as discipline, products, and rigorous excellence to includes operational channels,

growing these to for is like key well-positioned demand in upon expanding of and several our strategic a and is our growth and and like top our to effectively. our highlight include There's bottom-line a build among compete few integrated of customers the been services. focus around ahead, vendors and and insights investments more tightly advance the achieve software, momentum areas to strategic aligned goals. and actionable opportunities which data growth and team technology drive in year initiatives to our Patterson value-added objectives, I'd software

Animal we've growth for opportunity As within a in Dental of Patterson suite and solutions Health remains believe our software segments, robust both the discussed we offers software today, already but significant.

foundation, strong and As we are to investment in customer we our our evolving expanding existing our capabilities, solutions forward, preferences. to leverage add our move better address

focused Value-added and essential broadly. we their services at and expanding software, increasingly value-added like partners are business Beyond on turning address services ease also category administrative Patterson burden. some needs our to more their Customers been differentiating have for time. an important Patterson to are

it we and top However, area more achieve will this can remain I a believe in priority.

are of comprehensive value-added our value across Importantly, drive and core equipment. categories sales offerings central our proposition to consumables distribution and the services

focusing we While dynamics. adapting also we are evolving expand industry meet business investments our to in key areas, on

us they healthy. to As keep change, their best is approach strengthen channel to meet where serve focus optimization and will the and go-to-market expectations; our on are animals to continued product our including and customer's a adapt and needs designed exceed people we who our ensure them

To drive practices, our organization. and to are platforms, within leveraging meet Across are areas changing of all expectations, business, our committed these redundancies. we efficiencies expanding common best we the managing expenses to and eliminating willing greater our also

strong long market to years of to our areas over upon past distinguish the focus creation the position several strategic and enhanced our further value growth, success together, our foundation drive build over Taken and to profitability term.

and in the year-over-year we as across strategic guidance growth both of to margin earnings fiscal per for well and internal our accounts and the adjusted to Dental total range to operating segments. behind diluted Health guidance reflected deliver as company Animal our adjusted today. $X.XX expansion is initiated that growth for share XXXX opportunities, strategy commitment plans This invest Our sales $X.XX and our

detail more I Now, results. to our the turn call to financial provide will over Kevin Barry on

Kevin Barry

April the In you, and of fourth fiscal outlook results morning, good well XXXX as for which I full-year issued fiscal cover XXXX. our Don, modeling for with this along discuss we several XXXX, prepared also fiscal our on results will assumptions remarks, ended for quarter to next year. as related guidance will Thank everyone. the earnings the I our XXXX, fiscal financial XX, my morning, financial

our one in adjusted for contributions Companies Patterson XXXX, X.X% fiscal ago. for Internal of from of same to fiscal of sales XXXX for fourth last the which acquisitions X.X% reported period fourth recent the year billion, quarter Consolidated the effects year. $X.X quarter sales increase an currency and versus quarter fourth fiscal the were compared increased translation are

full year $X.X versus period X.X% were XXXX, Companies ago. for Patterson decrease the sales one For of fiscal consolidated billion, reported year the a same

currency effects and extra sales selling the Internal for are acquisitions XXXX. the which adjusted to translations, in X.X% XXXX of recent from week XXXX, increased fiscal compared for of fiscal results quarter first the contributions of fiscal

XX.X%, quarter basis fourth points the increase an Our XXX was compared prior XXXX year. fiscal gross of margin to

our Any offset accounting to or which impacted interest financing from basis nearly quarter XXXX is rising in and expense our was line Our gross equipment hedging adjustment our by financing positive by on portfolio. fiscal our reflected fourth corresponding margin negatively by other in impact rates is on P&L. of negative the the interest the related XX mark-to-market portfolio points equipment instrument,

So has minimal earnings impact the on our net a adjusted per result share.

rate If normalizing this also accounting fourth segment. the fourth but you XX quarter our mark-to-market margin When XXXX. adjustments accounting the accounting calculation XXX both fiscal of XXXX Remember, than points. quarter mark-to-market occurred points margin, the total recall business gross the adjustment company the fiscal our the basis for our the last of gross quarter fiscal not impacts impact margin of gross when in within higher year, is in was of negative the mark-to-market of periods, impact dynamic basis fourth in

XXXX improvement For XXXX. margin the accounting to XX gross gross to equipment mark-to-market of full the of an periods XXX the full a our basis portfolio margin XX.X%, financing improvement fiscal points Normalizing for fiscal of the XXXX fiscal points adjusted to impact our in results was compared in of adjustment in compared basis year fiscal year XXXX. both in the

business Importantly the company, year, improving and a each continue driving during gross XXXX margin prior of accretive execution and quarter our units fiscal entire year-over-year the focus the cost their respective fiscal gross Across increase on to mix higher our and fourth the versus period. for of product the margins posted we pricing by year to categories.

the XXXX. a as fiscal fourth quarter fourth by percentage compared sales of net of Adjusted for operating expenses of XX unfavorable were XXXX fiscal the XX.X%, quarter basis points to

were adjusted a For operating In year last XXXX points of prior fourth fiscal of XX unfavorable XX.X% compared to year. the XXXX. percentage quarter basis margin increase of slightly of full and fiscal adjusted basis to by the our points the year compared as expenses fiscal was X.X%, consolidated of quarter net an operating sales XXX to the fourth XXXX,

prior an XXXX, X.X%, For adjusted consolidated points the our year year. fiscal improvement fiscal XX of margin full was over the operating basis

compared basis full margin the to points on consolidated to XXXX the by accounting basis of adjustment team's XXXX expansion fiscal proud XXXX. fiscal for operating year and our margin mark-to-market normalizing the by of business and periods expanded commitment to margin gross the both for efforts our the year over when our operating fiscal drive of fiscal in our points segments, to of of in company of for I'm total each expanded the for quarter consolidated XXX XXXX, adjusted fiscal full XXXX. operating quarter deliver of Again, impact the related in fourth margin, fourth XX

margin translated of and cost we mix, working with with profitability expense more a higher The pricing to structure sales driving vendors and who reward in exercising foundational our initiatives have performance, for leveraging to level strategic Patterson. improve for closely execution, put our place us discipline, certainly gross cost improved

XX.X%, fiscal prior compared rate was XXXX the XXX points of the increase an to basis Our quarter fourth of year. for tax adjusted

a full fiscal XX fiscal Inc. year of income For of Patterson net XXXX, to compared share. basis rate the compares This tax Reported the XX.X%, to points Companies $X.XX fiscal our fourth $XX.X of adjusted was of a of for of $X.XX XXXX. year year decrease full reported million attributable or in million per share. last income diluted XXXX diluted the per net fourth to or quarter was quarter $XX

fourth share diluted Patterson quarter one-time $X.X and record or asset. margin a of fiscal the diluted to share, XXXX in gains fiscal million per equipment Patterson. for well quarter to of fourth attributable is for per adjusted as income excludes income in investments services, deal of the quarter Companies real due and fourth operating gain in of diluted $XX.X as increased or net dental $XX.X share compares a sale a $X.XX sales with related This to in XXXX, fiscal of Adjusted to on adjusted million fourth million amortization the XX% per quarter per the which diluted share reported business earnings both XXXX. This $X.XX increase in $X.XX segments. quarter expansion contained the primarily and net Both or value-added estate year-over-year

fiscal fiscal For of XXXX. million per diluted the Inc. deal per Inc. totaled diluted to million fiscal compared amortization, $X.XX Companies $XXX.X attributable reported gains share to in per million investments diluted which or and $XXX.X year per integration $X.XX Adjusted was Companies share $XXX.X or charges, share million attributable XXXX, and Patterson to net business year. the full $X.XX income income to in prior compared legal Patterson inventory or on net excludes restructuring XXXX, share, donation fiscal expenses, diluted $X.XX or $XXX.X reserves, in

XXXX of compared of XXXX. impact quarter the internal Dental to deflation segments, Dental XXXX. to the XX.X% increased our business the for fiscal Infection starting XXXX, let's turn fiscal price quarter business our internal business. Control to compared fiscal for of X.X% excluding Now, fiscal increased sales fourth quarter our products, fourth of sales of of the Dental When In business with our fourth quarter in fourth the

ago the compared year fourth consumables again one control Internal quarter fiscal X.X% increased control products, dental compared increased were fourth impacted year-ago quarter to performance X.X% in of moderation sales non-infection continued Internal pandemic-related period. sales last the of infection year. to by the compared and the to products the in of

to X.X% of XXXX, sales full For consumables by of products internal due the the PPE declined fiscal year. the year deflation of during price

impact Dental fiscal these the consumables increased XXXX to X.X% of fiscal by Excluding XXXX. compared products, in

quarter with internal the compared XXXX, fiscal product Dental sales across XXXX, of fourth increased the to In XX.X% of fourth categories. of quarter growth equipment strong all fiscal

momentum improve our strong additional finish equipment maintain Our to open invest practices or their as with and offices. XXXX sales team to drove to continue dental demand customers fiscal

For sales fiscal equipment fiscal year of the XXXX. full X.X% XXXX over dental internal of increased

Internal sales quarter of favorable by fiscal XX.X% and entire e-services our our increased business. continued over we solid represent our technical year an provide a of period, are Value-added offerings value-added services suite mix us of fourth of our the the year-over-year for their that led performance and the service team, XXXX valuable indispensable to P&L. also services software growth help to and make to partner of these practice customers prior offerings

the margins value-added quarter fourth operating increased XX.X% For year of operating in services fourth growth margin the This expansion margin were deliver operating of fiscal in quarter year of XXXX. a improve dental fiscal as to as compared sales Adjusted of basis performance X.X% period. and of the fiscal the in Dental discipline prior margins over margin point improvement internal fiscal to XXXX of full team the fiscal XXXX XXX efforts higher fiscal in fourth the well XXXX. gross exercising quarter our products continued reflects accretive through expense continued driving to

a the of dental the real gain estate addition, operating assets In the our fourth of million sale related quarter. to in one-time margin $X.X contained

prior For Dental in fiscal basis over XX point fiscal operating XXXX, were year XX.X%, a improvement adjusted year. full of margins our the the business

the sales year ago. business quarter our Now, let's to In increased segment. Health internal Health period XXXX Animal on fourth to for same of our X.X% compared the move fiscal Animal one

business for were For fourth X.X% XXXX. the companion the compared increased up prior XXXX, our animal business to compared fiscal full the year internal XXXX year. for in sales of the of to fiscal quarter fiscal Internal Animal our Health year sales X.X%

business animal fiscal fiscal full the in X.X% For companion internal sales compared year our increased to of XXXX, XXXX.

animal by ago. period XXXX fiscal compared the decreased production business to the in sales Internal for fourth quarter our of X.X% one year same

XX in the increased points were year. For full our in an X.X%, of to animal business Health the Adjusted our compared XXXX. sales X.X% year basis fiscal fiscal from segment Animal prior in operating internal increase margins the quarter fiscal production fourth XXXX, of

compared Animal adjusted points of to segment the For our XXXX. fiscal full year of basis margins were which Health XX expansion operating XXXX, represents X.X%, in fiscal margin

business Animal for fiscal our margin sales, to Health Health discipline fiscal our Animal fourth with team year partners, at expansion XXXX the expense exercising increase also operating value Our team as while delivered who ability strategic of manufacturing and full to continues for the XXXX. quarter drive

let and flow cover the Now me allocation. free cash capital

cash by flow, increased declined million in to During spending we XXXX same fiscal related to fiscal primarily slightly the level due of year month XXXX, our receivables as a one This period of had $XX.X April. compared the free an level was as ago. to in higher strong capital sales well

we allocation, of strategy fourth fiscal million of XXXX, cash million dividends in approximately $X.XX Now X.X Patterson fiscal fiscal fiscal paid XXXX. to share, in continue to $XXX.X the company in we fourth of during shareholders, quarterly capital repurchases. quarter the XXXX, our of our Companies been to to the XXXX, return shares cash execute dividend cash at which diluted repurchased a of the quarter per returned the declared Also to first has the share and beginning on quarter turning form shareholders of stock, of of

to to This outlook issued our XXXX. per $X.XX range Let for me of share. share XXXX $X.XX we adjusted diluted per guidance conclude and fiscal of a financial range earnings earnings $X.XX diluted an GAAP morning $X.XX with guidance for fiscal

purposes, fiscal XXXX. items our few additional as about a think let to for highlight you consider modeling me For guidance

$X.XX $X.XX of XXXX of our earlier, EPS. to sale a the First, represented as approximately gain from one-time related adjusted fiscal adjusted benefited of EPS real estate mentioned which assets,

continued compared fiscal of products some modeling deflation these XXXX. fiscal the products Second, single-digit PPE pricing low-to-mid to revenue we This of XXXX. is during growth of inclusive in are

both units also operating margin modeling for expansion are the total business. We and business

Fourth, expanded in noted, than and are the Third, as we due where UK and investments value-added other adjustments of tax services reflects further grow rates develop fiscal Don capabilities. XXXX XX%. This finished we to higher a rate to guidance overall tax and higher our increased is our modeling to expense. our software approximately tax

And finally, we additional on in expect debt. higher variable-rate our rates headwinds interest to regarding face XXXX fiscal

If from real benefit you the year-over-year adjusted the the of per of diluted with our the assets EPS share a exclude our share, range X% top-end one-time per estate $X.XX XXXX associated at $X.XX growth adjusted and fiscal sale XXXX $X.XX EPS the growth to performance, guidance of range. X% our at implies midpoint year-over-year fiscal

back turn will I for comments. Don additional some to now, And the call over

Don Zurbay

Kevin. Thanks,

Before adjusted year-over-year key reiterate growth it call delivering takeaways fourth we to quarter financial of we achieved morning. few up including which Patterson a and had our I'd an for our sales open exceptionally fiscal like strong margin operating from goals year this Q&A, in expansion. a

fiscal and is record quarter a performance over years. past of continuation the fourth Our during the track several throughout XXXX success our of

this proven long value term. and We over are enhanced to creation growth, build refine to execute upon continue to well-positioned profitability, and and we strategy drive the our momentum

That to line. take and concludes please Kevin I be remarks. our prepared the glad Operator, will open questions.

Operator

the from go ahead. Your Piper Sandler. Instructions] first line Please of Bednar Jason comes you. of question Thank [Operator

Jason Bednar

impressive We've expansion it, the the year. fiscal and along quarter. call last, margin or the Hey, was out Don on few the morning, for been going extremely here fourth of close performance nice path good quarter Kevin, modest congrats in real margin the years. a to

highs you've Dental and but that of are helped, sitting this With strength for Health, adjusting probably Animal the you couple of one-time quarters, Dental just them that blown the dental the equipment last in I you of understand each mentioned. multi-year quarter after at out gain in even water.

you it's where could we a forward multi-year high-margin these been you to how coming to about as performances, you road at, long we're think talk but think see about a for Animal potential to get don't the So but where there, and LRP out the the know years? you as I next Dental years, of do look you formal ahead Health few have

Don Zurbay

Jason, Thanks, the and Yeah. appreciate comment.

journey four and put the place the the programs doing we're you but are is at we looking the or last sustainable. five think are last, margin in think mean, I I that the years, say working, really been the impactful has we've what could things fact that we're

forward, talk up like about about we the improvement And and we We profit margins a our talked think I down the you so, have year-over-year basis, XX point would on basis as company. go basis XX could and look I or for point think that to we lot make both improvement we to committed that's overall could place. decisions company we're really a that, impact that but some the that's as profit a hard, certainly investment in there's here, operating drumbeat units of of programs and business work and the in constant

we are sustainable programs talk programs. And the about when as I mentioned, those focus,

that Kevin thoughts things excited you if and might surprised or importantly, any additional forward. on looks we're We're some it. you maybe, we're pretty but pleased specific more mention, not So don't comments that going know, have what like by it I with about

Kevin Barry

Yes, Jason.

the we our in we too And efficiencies like can network, the margin some our feel implemented us around speaks think gross it distribution our I with and that initiatives to that starts long-term in internal performance, think a this year really helps. strength got drive this to mix and -- these we've that of areas really base our quarter, that what's we've of cost is I also products, margin leverage. focus line ability for gross

both with to, business topline, our us allow can are out operating also reinvest and really but were continue expansion to customers we good our need that that of we to we operating on. how feel as winning as margin today, get driving journey we So that's we're with out we expenses that some in going the leverage

Jason Bednar

versus the low-to-mid this dental other in overall is trends the from all there. exiting it outlier of big much much within an tone across maybe you therefore portfolio. in sustainability fiscal nice last been that's That's sales confidence quarter, least and demand that improvement in a at today? quarters we've demand place? XXXX regarding in and Okay, a real-time of order your and the across It in was what seeing me. probably share you company-wide revenue is single-digit maybe dental on demand guide The improvement couple great. the you. helpful. a of of Thank you book gave the equipment can equipment clearing sounds lot from And strength grow like demand like seems to Anything the seen in how backlog quarter How

Don Zurbay

I at certainly year, really. quarter, some Yes, both cadence of to given our fourth second the things I think particularly have the strength. things do we half mean, of the just show look of you'd the

a the always backlog. bias. probably there's second-half bit So some There's of of little clearing

I talked growth look periods particularly it and most it thing if the it lumpy, it back and proud I equipment you are quarters. of this average I and longer I'm back a But about behind good increments We're across go time, here, and quarter. look we've before, but going think over equipment not the was of to you eight three-month over in X% think was equipment back if whole because know is particularly, important minimize very portfolio. though, important the what's we last

you smooth’s all out doing. gives that really of we're of snapshot about a you're the and talking of kind things good think I what

the and to we management equipment full our that's that suite use when think products sales. -- we our we our this of lifecycle really that it’s the advantage have shows talk and kind market think in We about above it of kind we growth, the customers of area

back the So, of of and a we that. I proud we're and doing I pretty but again, think are think kind of how than that, all step better market little say,

Operator

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

Michael Cherny

Maybe investments from quarter want the at kind on of expect dynamics And downside strong of be the Can some morning. Good about alongside over you course on but that and from dynamics you well you'll you the us pricing echo a quarterly a guess two-part perspective up year. give or of innovation that magnitude comments some to PPE. question aside either variations any to I sense any as the robust the of I outlook. the of interlocked, a making? the either that regarding least a total the mentioned or of

Don Zurbay

walk Maybe here. we're of much share to as little Kevin kind I'll let a as through going

Kevin Barry

XXXX, Yes. that to the stabilize. a starting that in Thinking of what on prices basis, F to built That's year-over-year PPE when through our lap when half should expect the dynamics, basket still go is see of the we on going of back products That forward we should year. is quarter F of a first headwind first Michael, dissipate we're of But really see into our really to a compare expect it. we you guidance. bit as the that we XXXX

OpEx I'd year line. on in of say here the built the year, this making on I'd I a as we're bit on the So, of ramp anticipating all -- the that course some in probably those there. guidance say, of there -- the we gave call, those a details go now, that's investments the will we're starting over be

Michael Cherny

pieces, normally think would else Anything to guidance. what I moving built expect launches expecting expect asked off meaningful in different is but or product segment in variation what's the are a other what on that you quarter, versus seasonally any year given strong normally. you'd the coming either about Obviously, that equipment any you a Jason from have

Don Zurbay

is things the that's don't he can a on into again, you at the a look think guidance. mentioned that software environment, all about and talked just increasing interest rate basis year-over-year the things, the kind at built I and those includes And Kevin No, impact obviously, some but I guidance, least, headwind, so. year-over-year investments when of think

really those feel underlying is up I we really strong, headwinds. to set even given, the it shows we've think business what overcome is which guidance the with is,

Operator

the your question Sachs. Goldman you. go line Nathan comes Thank from of And next ahead. Rich of Please

Nathan Rich

compared feel maybe we think the health similar fiscal growth should how fiscal into Hi, maybe kind to dental I on for good about consumables up consumables, out end can morning, X.X% strong about year, control. price a questions. consistently ex-infection of I level I and you you year and XXXX? to start the And you about how for think, the Don, the wanted market thanks think patient the volume for of and dental of of talk kind traffic, called fiscal

Don Zurbay

is steady an this think is very we're business, I what where traffic. [indiscernible] in Yes, seeing area our

certainly the utilization in of I any but and think our combination data we're modeling I bearing next is really fluctuations customer of out, think own that a it's and internal and that that. in into not ADA kind seeing utilization price base our significant data and look we as we're year, really

if way for that's next you'd you're at that look us it think operating same and for dynamic. at modeling now year, least, probably the I of business the good kind proxy for is a right

Nathan Rich

follow back good to as XX wanted you here from what points And opportunity helpful. but basis on fiscal I could comments in just frame to earlier think talked I about as a margins, was the points the a target, the XXXX. XX being that's maybe to up, basis you relative to Great, go it

used talked were of do a potential this to back for margins eventually margin in play that see X% years the you next are five years over where the of the business. you of of X% if forward? that five longer-term now You of you've kind But get we this back about can kind three, obviously they progress It kind kind to is above where margins be made. to, kind where ago, look

Don Zurbay

are that from back the cycle we that and long I on on sustainable too benefit business years more from term little track more a probably five and improving were on we idea and that consistent well, we Yes, to the going I'd forward. the where a thought we the earlier but programs years guidance Nathan, like away think bit term benefited long margin basis I just over stay putting the much in on in last think time our that same would getting were basis with we were, at specifics,

the through really a we're now, one-time what's types seeing things. a when of long-term And standpoint through from of really look or right it of not at we sustainable So again, program. this benefit those initiatives margin thinking what think we but a we're and is short-term basis,

at of XX XX I point that we for our me so, each to that, and foreseeable year. again, say for as about look improvement looking at basis future, would point basis we're And horizons kind talk future, I forward

Operator

Please comes go Thank ahead. of you. line And Block Stifel. your the from question next Jonathan of

Jonathan Block

Thanks guys. Good Great. morning.

is April in heard AR light maybe a comments, of some other recent it strong, April what can is about of that bit of Just most importantly, that trends from throughout How correctly, continue you the any that? touched did May? if recent Thanks. or correct? if one, companies, were the it in might little build you extrapolating conservatism seems I when strong the guide first on trends have guidance, into May, to sort continuation you a And recent are you the news regarding the recent think just Kevin, then quarter. full-year the was we like you did talk that the to around

Kevin Barry

Yeah, think, market, our business. dental market I just our reiterate services consumables specifically, we and us, traffic, kind talking very start of steady I Don we're business, for said, try to seeing about what with the value-added end patient just

we quarter, that we quarter, market. think look of the for all us. I across more the again have as we stronger us we equipment, ended just the think as equipment, end that in we consistent again, have the being look strength that quarter to In I the like which saw said, forward. within to stay was health did But like back throughout see categories fairly we sub equipment forward speaks fourth will Don

need we're go practices, they them that meeting work we're have that the to to and those the through we invest technology continue and that's or with optimize forward, and offer. continue we whether strength with in new as products to dentists a so look make within practice, of to expansion going Dentists their ours sure where they

So, we here XXXX see go John. dynamics continuing as those into F I

Jonathan Block

Okay. then it Maybe look animal animal the the I've from to but two Animal stacked market, more companion. quarter rough mean digits, to Fair double I'll into could to recently. just to pivot guys. that. low fourth crazy continues companion specific results, a looks I solid Health of maybe again, you fiscal Health. if year right, Thanks to expectations are most had of if companion enough. like charge, your it Animal straight then what amount and of call I to mid-XXs the it going companion decent decelerating like Thanks Dental you by And clip, right, resiliency the for just got XXXX, if levels, talk lead at seems numbers, it the the

Don Zurbay

thanks, Well, Yeah. Okay. Jon.

of over been you're right there period look definitely I referencing, think you're think time moderation. I that -- that has

pandemic slightly What about is all we're of other visits is talked the You factors. but now of right down moderation dynamics the kind seeing up. the spending that are and with

I and in [indiscernible] are I when through we think think back cut as standpoint, I us element people to well, maybe bringing we're a data the market. as market the it, but catch-up we're outperforming our a think healthy again, from

we be there'll gainer, gaining the think we're in be share. to we that's a but we're market movements share So particularly, want market, where some and

Operator

line the of from comes question Johnson ahead. next your And you. Thank Please Jeff of Baird. go

Jeff Johnson

guys, good morning. Thanks

you around have word a my stability been Dental of questions here most used the lot think but answered, I the business.

X% this eight quarters, your you last heard about dental notwithstanding think But been probably it's well. the equipment Don, answered It's I last last already months. six the are you growth growth. been question think So over growth the over over XX as when I I X% X% months, the business,

is kind is fiscal be that we the seeing a XXXX So trends, you're what backlog thinking digit about as go jumping and good a reasonably with off equipment here? good into in order mid-single on place dental of that to

some around nicely, talk helping pricing? Thanks. on up if tax pricing equipment versus or tech just two out is on then how the of you in that balancing pressures is know offset side very could fully basic. I maybe the deflationary are And about basic just those

Don Zurbay

good I Jeff, think, Well, Yeah. question.

we months I eight and over that range digit the think have last over on X% mid-single your I X% last XX think good. the is but quarters,

good I way about slightly longer over term. this a think to that's the think

in I think we're for pretty our pricing, seeing seeing think stability, area. beat stability I On the on not us, on but pricing we're again, this to good

spite in trends held the a up the of of program so and has program disciplined the demand. some We pricing has and have a healthy macroeconomic and

to be. So for has it us and good been expect story this a continue to

Jeff Johnson

helpful. but survey consumables, some the of decent the are least little guys just on of and guess some question, think Yes, at what's the up have of acuity I down the mix orthodontics on our side, insight, things obviously business in a follow you work seen business, the And high that's Dolphins bit. patient a in we've general then I probably or overweight end, you kind holding but consumables patient been clearly volumes per maybe the are coming one spend is that high

the us yield your study what's much general maybe that the really and consumables or how side generalizing? the Thanks. hygiene that like [indiscernible] understand would of data that that what of spend is the your help acuity sense versus just helping on higher of spend anything per orthodontic kind and seeing patients So you're in kind levels versus that some patient

Don Zurbay

it's kind just demand pricing, us. of and a Again, I I applicable data -- think to both. probably a I you're of I’m quite mix orthodontic if I little getting as guess isn't think the mean, of not

Dental Difficulty] the point utilization theme. [Technical the of traffic, steady steady would to ADA I traffic to more back that data, those reference kind that So to

Operator

your Thank question go you. line Elizabeth Anderson of the from of And Evercore ahead. comes next Please ISI.

Elizabeth Anderson

of service. some about the guys Hey, guys about Talking and thinking in investments Thanks software of you question. so are much terms that the for value-added

do you think calculation the guys you have to do that build? of I'd in think that understand bit sort areas. the in prior how how of buy I be should I versus two, or about on just like and that? details confirm one of Thanks. wanted specific I B, to then you Is your kind more kind OpEx you of do evolve that of that any about And questions sort reflected on little think more, A, guess a heard I line. just

Don Zurbay

for question. Thanks Yes, the Elizabeth.

built. both maybe lets committed were -- are build. capabilities, we generally with start enhance the buy looking at think mean, to I to versus our we as we I continue

is that's that's an The higher here investment we've themselves element capital in all that is we're where reflected today. guidance. the through in There there of been reflected numbers is history is the an think investment the of the talking but been and Fuse. overall comments involved, I it in element our been in that's operating expense,

And specific are competitively that additional I capabilities, platform into get get the Eaglesoft in think then making we -- just the and all capabilities, you I say both into Fuse. all I wouldn't I investments would guess our

our where fast view think paced are really a about is are we excited area. I very headed. that and these they're evolving It's where products and

cloud the but features having and again, us, for we So functionality is on the base side. side on-prem on the need not important, but only

happening So, a lot it's of and stay there's innovation and technology ahead quick of lot to so things of determined happening and that. here, we're a

Elizabeth Anderson

dynamics customers, I And new how those and helpful. my any changing? seen very at relationships, I little among strategy of update an how large are have on your you a there, some that in haven't is, the we that's market Okay, all while. obviously Have guess, question heard presence mean DSOs, sort general next we you should that is dentistry think about

current in viewing curious I'd So you're just sort be of that how the environment.

Don Zurbay

so, area, of new consistent I both think we I the regional but overall, of and is side, a any it's report on dynamics. core have mean this We nothing different evolving, regional I think on pretty it's obviously, them. don't in side, kind is a -- particularly good think we're the national story. working this but steady, really our competence, of terms strategy to DSO good I area. the there's really there's probably

Operator

Thank you.

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

Kevin Caliendo

expectations terms like modeling is second out but give of guidance or us provide as in get first growth the expectations? the know guess you in the just light, quarterly of us can half, the sort kind numbers. you even one to And about quarterly just revenue some to help to color you there or provide we margin some full just cadence. the any of for think the to lumpiness first half, guidance or of or can I don't year year on I Thanks. is

Don Zurbay

be fairly past of in now. we're in years, right think it of couple forward, say, should I'd with the how terms Kevin, first-half, split we I look second-half our Yeah, as line modeling

Kevin Caliendo

is from That's you're great. an EPS what Okay, describing? perspective,

Don Zurbay

Right.

Kevin Caliendo

Perfect.

across on You also all talked side a a talk backlog, bit the across where categories, the little across of equipment bit going between I you little more demand the maybe you're you was in you dynamics back? you maybe of bit you of three sort demand, but than maybe was can, some forward, backlog think there expect Can looking little the saw as changing be where there about seeing drawdown a in little to about categories and maybe and said backlog. color come best what bit, demand three a increased any said a strength the where

Don Zurbay

it mentioned, lumpy. Yeah, is I think, we bit a again, as

that So, think more and -- that there to its it between give data, here believe it that's And be time of back at correlation would so but this right anything other I then not going insight. we traffic nothing look cycle interesting our holding. but would more kind innovation is the at we're we and in the watch we reflects through on each on it watch backlog categories reporting depends you demand, terms installation and don't low, so, any the now of think inventory of of overall I'm I haven't, me, as out with kind backlog the and backlog a drawing high times times lumpiness, I at

Kevin Caliendo

more… If I can ask one

Operator

and for second. in next your person question. Brandon from next I'll Vazquez of go-ahead. move comes on Blair. going to that, question to I'm Pardon Please again And on up a the bring go William

Brandon Vazquez

for Hi taking the thanks everyone, question.

consumables-- on we one before. that were Just sorry about on talking equipment

no, prices curious of any in demand you're a segment but or if seeing maybe given for within about markets, higher the have been strong of the any maybe like as how had equipment, that towards if lower you demand how equipment end guys higher may internal lower quarter, especially a are has curve, of little the not? But in get within strong. talking bit adoption some Some scanners answer is curious a there you in shift, we be has been been space other price seeing peers

Don Zurbay

the technologies think our say I Yes, I our really I a And job those pop of guess dental got it, meet happen. job declines I'd practice we've needs good increase team managing teams a most increase of pretty and broad things how you dose demand of needs a multiple field, those is what price there generally and markets really out those categories is in understanding good adoption think up. and do to selection when a they what see when through equipment dynamics, and

sales is force that them good So variety and be needs. benefit to knows match going a for really I think customers we of what what's a a products that's knows I'd to those skilled meet our at wide from say

Brandon Vazquez

thanks. services And then great, my back value looking software the added at segment. Okay, second and question,

we there in guys Another great pipeline, little about for quarter that slightly a question, ask the and different. maybe earlier you asked what's bit but I'll

like software, maybe any figures from and your your the way you services the like that percent incrementally can what frame or kind what can value-added us understand pocket of for value of using anything added to helpful are services Is there customers customers, you get just share, any Thanks. opportunity market? within current today

Don Zurbay

of it high very not for helpful. appreciate reflected make want this point. margin down, yeah, going and I'm a of we're is you think a for probably to not Again important part maybe just investments, the huge of going product think forward. track, us a and to give addressable to here, to of a I that focus our to but, say a I data, kind portfolio, that Probably much our portfolio I break market additional part be it's in the too Yeah. going going question something it's product give of level us. we it's big suffice at this

Operator

Please your Thank line you. last comes the Credit go-ahead. of And Rice of from Suisse. question A.J.

A.J. Rice

maybe of ones here. Hi, a Thanks. quick everybody, couple

changed You couple at impact to financing looking opportunities any their way. the approaching has how Are changes a in your equipment willingness times, or there? buyers of as seeing mentioned environment, rising any wondered, equipment and market, finance are that are you I the sales rate the you

Kevin Barry

a sometimes the demand financed, them. closely sales manufacturer Yes, A.J. adjusted we've we that change I'd say with work promotions rate and so to get of can drive area we smart seen rates and are and to with our environment. financing how much participate dramatic drive higher But our partners obviously those we the more reflect our haven't

Some the that opportunity. look of those help a they dentist at as promotions can ROI the for

A.J. Rice

easing some discussion then of and year question. some other a And easing potential of about market or in areas underlying of seeing forth. having your in obviously in Okay. maybe impact And on bit hygienists, base oriented and customer had on of veterinary similar been the of that wait you've in your that we're health the and appointments times either areas are commentary supply seeing side. those is is a get sort There's you dental space, to so another lot little the tightness any next of consumable a also

Kevin Barry

I dynamics on wrong, that's quarter. after Well, [indiscernible] talk our challenge in we're there, that's don't up think covenants dental and for again to a those not factor. ADA and me you I what traffic, for thank I data out question our in I'd not everybody we're time to their back think Companies aware today we'll interest the and get us last steady has next now from and some Anyway, but shortly for there Patterson really in shown our of been major definitely data, a it's seeing it and go the right

Operator

This concludes conference call. today's

may disconnect. You now

Patterson Companies (PDCO) 21 Jun 232023 Q4 Earnings call transcript