PDCO - Earnings call 2 2024 | Patterson Companies, Inc.

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Operator

Thank you for standing by, and welcome to the Patterson Companies Inc.

Second Quarter Fiscal 2024 Earnings Conference Call.

I would now like to welcome John Wright, VP of Investor Relations, to begin the call. John, over to you.

John Wright

Thank you, operator. thank Quarter participating Conference and Fiscal Patterson everyone, Second XXXX Call. morning, you in for Companies Good

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

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

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

rate GAAP with provided the in will adjust tax call, of along of release our measures reported fiscal press the conference Please results morning's an amortization The quarter these and impact we reference related XXXX. our note in for to interest deal tables that this swap are various any effect of items. second adjusted reconciliation for

adjusted free net to and non-GAAP and measures results. sales an We cash be a impact our release, to exclude interest is rate foreign currency, recent in the not which as non-GAAP acquisitions the the swap. a from substitute earnings contributions intended for represent of use term measure, net GAAP sales to These impact flow will defined internal our discuss also of are

This call today available week. is Central at period X being recorded will replay Time for starting for of XX:XX be a a.m. and

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

Donald Zurbay

John, to Second begin details more the I highlights my Patterson's everyone, of and segments. providing Thanks, Conference before of performance welcome, Call. XXXX today consolidated Quarter our Fiscal each remarks results will of our with on

Our I'll and macroeconomic strong discrete varied team that executed start against other segments. the had on uncertainty industry quarter. backdrop key Animal of Health with highlights impacts Dental our well within the factors in of evolving and categories performance

tough Dental year's deliver a the sales resilient and to demand. despite market And delivered In growth our solid Patterson's performance. category strong steady year-over-year to us growth portfolio consumables second quarter amidst enabled patient above equipment growth broad core last segment, comparison

achieved within significant Animal best In primarily value-added sales both our that And software and strong outpaced categories, Health growth segments, achieved Health, our to producers. Patterson and the our business business offerings, serve of segments. built services growth presence in our leading Animal the due has Dental animal sales omnichannel market-leading including production sales overall that to

decline spending. business in visits areas experienced in Ultimately, and results, second the business. X conditions and we delivered these in our impacted impacted dental of we EPS was of by animal companion our demand quarter our clinic adjusted Macroeconomic Offsetting softer-than-expected vet categories, performance $X.XX. equipment high-tech a

share returned repurchases. through our million dividend in to and We also capital shareholders $XX

revised our guidance adjusted reflect our macroeconomic fiscal to decline that of previous challenges believe now are therefore, our range we expectations the range. $X.XX for diluted persist likely midpoint of forward, of fiscal the deliver to share, and in year. at for We, $X.XX expect industry to per duration to the our XXXX earnings a Looking year. the We of adjusted have X%

progress reminder, as market to remain growth achieve build evolve proven which, rates; services our our third, second, drive X is to we've efficiency made our channels serve end designed strategy, core above our enhance margin customers against on focused markets; best revenue the executing growth and current to end upon We optimization. the a objectives: performance; and and fourth, the improve in first, products,

strategic investing challenging more in distribution includes investments we the for as choice our continued a offerings of environment partner our differentiate a to Despite in value-added and across quarter, software our customers. our during Patterson capabilities, of long-term second service objectives. business services further macroeconomic This

confident managing ability term markets Patterson's to shareholders. the on focused resilience perform our and strength are and Patterson in long of for customers our and for in are We the end because we our

touch efficiency we that I'd like optimization of the on quarter expect targeted drive our and during made to the will second some investments we long term. the over

expanded to the country First, believe in will our on Dental business our that Canada. add we east recently We the dedicated completed serve features in state-of-the-art of drive enhance ability will facility side to a and of expansion Montreal facility the customers distribution the efficiencies.

to operations our efficiencies. American Second, rollout, in is provide our Canada. of in the important meaningful an completed ERP greater our our and to visibility we ERP U.S. This drive North system Canada connecting milestone across successfully implementation operations

Dental suite behind And finally, in to Patterson robust segments. our both our of also Animal Health solutions and software invest continued

opportunity and investing add As growth we've our discussed within foundation, upon is previously, strong we evolving to customer capabilities meaningful. we're our build software preferences. believe to address And for the

to team offering and returns from have we our our fiscal progress pleased a record track an are driving added investments, of XXXX that performance strategic we continue. technical the with toward even In and quarter, stronger software made other customer we building experience. We're second to our expect and and personnel dental resources

solving a production owned For animal margin Patterson of Dairy to today's ACT. to are Dairy RSVP business, positive staffing And is our than animal example, and for critical last for challenge in RSVP The of customers. those acquisitions brand customers. veterinarian to businesses continue we our that better health Patterson's demand, the year, most performing and expectations. and Today, RSVP meet Tech serve is completed platform contributor even expand our Tech more

our As calibrate second discipline to shareholders. dynamic way of cost we move expenses investment the and plan the appropriately deliver within environment a proud our our for Patterson to to fiscal 'XX, strategy macroeconomic we navigating I with to continue half our of macroeconomic team value through the in am balance we customers are the environment.

that enhanced end value growth, value creation make over proposition and We resiliency to the strength team, and of Dental well of long positioned profitability and the drive our continue to markets Health comprehensive believe our Animal term. the the Patterson

more business Now I'll each detail fiscal provide the quarter. of of on our during second the X performance segments

In quarter, declined Dental Dental. with Let's second segment sales start X.X% internal the year-over-year.

control our impact mentioned, the category infection of including certain very negative growth, prices. I As well performed in consumables sales deflationary quarter internal the X% product with

a Excluding growth. control we products, sales those infection nearly saw X%

first, private attribute targets We the few customers; to and and standard this suite customer strong including team. performance portfolio, strengthening by consistent expansive broad traffic label second, an finally, third, our steady consumables a our long-term patient our base; our products, strong execution resilient our commitment factors: to dentistry; which relationships of dental key for with our

patients in perform caused consumables Patterson to enabled category specialty us factors macroeconomic procedures. headwinds insulated and the postpone from well to these together, some Taken that

in equipment of sales internal the on even year's X% declined year-over-year. last core Patterson dental continued the achieved equipment during On strong quarter, side, growth. growth top

However, sales was than declining during growth equipment more by quarter. this offset the high-tech of

lengthening well industry as Our the broader upgrade economic cycles environment faced digital and as from pricing pressure. headwinds CAD/CAM and continued businesses

dental have long-term for And Moving a testament forward, there's important and by and encouraged that Patterson products. innovate plans This equipment. product service a when indicated new demand our long-term innovation, to to types continued of categories. invest partners are install finance, these has to leading we sell, the capability in manufacturing the these fact is all

a grow value-added strategic in our opportunity to Patterson. And a to customer and category continued finally, to pace approximately prior services customers we segment entire enhance make X% that of and our loyalty the at provide the remain practice. an the significant the internal represent growth over services exceeding of help Value-added increased indispensable year experience, Dental period. and offerings for suite services the Patterson key value-added rate drive sales Dental sales overall partner Dental focus their

dedicated healthy in and are achieve a our success Dental practice Patterson's modernization population, between industry effectively market deepening attractive long-term a of awareness We overall macroeconomic continuously team's health to link proposition confident We value is our by in for goals. continued and enduring remain drive to ability navigate and supported ourselves and and an that positioning aging heightened towards including challenges and ongoing health. oral trends, the

segment. Health Animal our to on move let's Now

an be in driver Health During segment proposition and the and increased growth, across Patterson's that sales environment seeing modest value X.X% a our Even second evidence we're Patterson's deep channels multiple internal of Animal continues to success. broad species year-over-year. of quarter,

In by moderated. animal, sales clinic our and digits companion as internal spending veterinary single decreased low business declined

hastened As companion tough I economic other moderation by and this [ inflation we mentioned, ] navigating to industry for attribute in animal a decrease climate the consumers challenges.

to long-term quarter put important broader this it's this the end of However, health market. into of context

expect grow term, long long-term market trends by whole a low supported pet parenting. in as single we to ahead, this the look digits in we over As positive the

production and the tenured win our performance and side, in omnichannel highly A quarter and talented the of continue animal second distribution new team business to strong internal outperform us animal our strategy sales presence, broader by strategies Those offering enabled comprehensive across species. executed production the grew tailored On mid-single market. reaffirms digits. production strength by animal to

timing run movement of the our to because more of cattle of performance historical fall yards. feed benefited Secondarily, the also annual and

address significant. that foundation, for Health services solutions for better to category segment, in to to in our our We're demand drive services and remains continue and confident operational solutions efficiency leverage rapidly strong preferences. grew And software increased and as well our existing revenue within software to due Across Animal equipment the also we value-added freight. continued evolving programs opportunity add customer to capabilities as the invest new our growth

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

Kevin Barry

this good our and In our results XX, and quarter on my prepared second 'XX, remarks Don, ended of which October the outlook year. with conclude the I XXXX, morning, will fiscal then you, of remainder for financial for the morning, Thank cover everyone. fiscal

which currency quarter of from net second last for the of interest sales the to Internal the an effects quarter by second of X period are our X.X% year. Companies rate same 'XX second for compared fiscal let's billion, an year So covering over of adjusted reported fiscal were and $X.XX of Patterson sales, begin Consolidated in quarter X.X% recent for 'XX. swap, increased acquisitions impact ago. the our the translation, contributions results increase

impact XX of fiscal increase for gross swap which that Gross is the quarter, margin associated the accounting equipment a points second Beginning basis our margin, interest gross fiscal to 'XX the was measure an we with margin non-GAAP adjusted of 'XX of period. provided related mark-to-market also the financing adjusts our rate year portfolio compared financial quarter second to XX.X%, and the instrument. prior hedging for have

the adjustment net net provide on rate customer adjustment sales impact the particular, within financing other the measure as rate with the adjusts to this the forward interest will classifies going the sales. fluctuations financial net to or impact P&L. gain the of In align it additional income swap from We impact loss this swap interest of non-GAAP for mark-to-market swap expense on

income. margin adjustment impacts has segment. but between the a interest equipment financing our the portfolio our before, total impact the Remember, and of not minimal the of gross net the as within impact company business the gross fluctuations rate mark-to-market swap And accounting net margin on impact

fiscal basis. have our we quarter compared For first the comparative a of adjusted for included year-ago year-to-date provided on period. XX.X% in XX.X% for 'XX, numbers and margin the the today's reconciliations second to We quarter in quarter was the release. these gross press second And

closely place to of strategic performance, to our 'XX, discipline reward for respective units. The during quarter sales have with both margin, year the second a we the improved translated year-over-year leverage their period. margins gross our fiscal mix, improved drive Importantly, improve to compared for put structure, gross into of our have expense posted working gross both initiatives and cost prior of vendors business our more increase in business us who exercise units margins

adjusted quarter basis basis fiscal adjusted the fiscal was consolidated of that swap the sales decrease operating of operating operating second of second impact year. compared of interest were expenses percentage by 'XX. second our net mentioned the as previously. XX to of quarter and Note a a 'XX to for In adjustment of margin Adjusted rate now the margin 'XX, of the fiscal X.X%, XX XX.X% our compared the second unfavorable last points points quarter quarter includes

to second In company that to overall. the of executing been within for the continue initiatives manage fiscal business segments margin while we plan the effectively yielding half 'XX, our our and have results on expenses,

Our period. fiscal an of adjusted the 'XX tax year rate was quarter compared XX for basis increase second of prior to the points XX.X%,

Reported last second quarter Companies, year million for million Inc. the the of per to or $X.XX net This compares net 'XX income attributable second per Patterson diluted $XX.X to income was diluted share. quarter $XX.X $X.XX of of fiscal share. or reported in

per the $X.XX million Inc. $XX.X quarter $X.XX attributable in 'XX million Patterson diluted diluted of second This lower or dental share the fiscal to to sales or in share. quarter increased $XX.X primarily due income fiscal second the compared share was and second net in diluted Companies, per earnings high-technology Adjusted 'XX. period. fiscal the of operating to for prior adjusted of to year per quarter compares This was expenses equipment decrease

quarter second Dental business Dental let's 'XX. starting second business. fiscal In the X.X% compared sales our fiscal our with turn Now 'XX, quarter decreased business internal to to for of segments, the the of

of second year impact negative to by moderating compared 'XX. second in control year past to to fully ago over control compared fiscal fiscal This certain noninfection has And in quarter deflation normalize of increased X.X% the Internal sales continue the increased year-over-year the despite X sales period. end the control impacted Internal expect infection deflation products product of we of products. year-ago moderated from continued steadily being the dental X.X% the deflationary 'XX quarter of infection at year. price fiscal effect and consumables

X 'XX, ago. fiscal decreased of sales quarter year second dental the to of X.X% equipment In internal compared

in growth product was equipment equipment purchasing quarter, price that digital period. as compared the these X core some of and decisions in prior This the macroeconomic posted on the categories decline more X-ray year-over-year the declines imaging offset than concerns categories. selling as believe CAD/CAM was result as year positive to We within by a category well decline the

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

of basis margin XX The point prior in 'XX, over the second decrease which fiscal X.X% adjusted was period. quarter year in represents an Dental the operating

service warehouse basis. expenses year-over-year drove our business second the in improved margins implementation business quarter margin technical SAP a for Canada gross our 'XX of and the in adjusted investments and on increased While year-over-year, operating operating Dental fiscal unfavorability in expansion software with to related along in the

In compared move segment. Animal fiscal Health companion fiscal sales decreased year for the 'XX, over let's quarter of fiscal our to the the animal of of second in 'XX second second business the prior Now to sales for period. business Internal quarter increased 'XX. quarter Animal our internal X.X% our X.X% Health

the more was Internal than from the the animal to period. sales performance in increased offset quarter in in our the quarter in year NVS U.K. production fiscal the companion sales business animal U.S. prior second X.X% business. declines Strong our business by compared for

to our to species production the across and execute approach continues growth in omnichannel with market. above the off pay Our overall sales several continues well team animal market,

in from Gross 'XX quarter, Health margin operating the Animal in second basis XX fiscal of decrease segment the in increased Health X.X% drove prior period. adjusted in operating up second was a The decrease our on of segment year-over-year the margins compared were fiscal our second points and the a quarter basis year operating to 'XX. 'XX quarter, the fiscal margin expenses Animal

Now flow items. sheet balance me cover cash let and

same fiscal fiscal to a the in 'XX, X working capital This cash months due the improved of During was first primarily $XX.X year months decreased period. compared year-ago compared to 'XX the X by of level X flow of period the million to free our first ago.

allocation. now capital Turning to

value-added Our capabilities X as higher and as of are software capital of million $X.X increased spending and 'XX million in services. months spending investments than $XX.X in first the fiscal the first reflects distribution X months 'XX. our This making was we well the fiscal

We continue our diluted In was beginning of the to of then to on per dividend quarter at the share, cash fiscal of execute quarter 'XX, fiscal first a return cash of $X.XX paid the declared shareholders. our quarterly we 'XX. second which strategy to

shares approximately thereby total second million of and We repurchased of 'XX, to shareholders $XX.X fiscal of million through during a also $XX dividends returning the quarter repurchases. share

me of remainder guidance $X.XX revising share share. a GAAP $X.XX earnings 'XX diluted diluted of our we the and earnings to for to range fiscal Let per our range to conclude with our $X.XX Today, fiscal are $X.XX guidance outlook 'XX. per to adjusted

have persist to uncertainty our macroeconomic of We we and these and GAAP year. our for fiscal the adjusted remainder share to 'XX environment revisions earnings made the account per for will believe that guidance

comments. over the call Don turn additional some back to for will I Now

Donald Zurbay

Thanks, Kevin.

the entire to customers. serving commitment Before for open Patterson our their continued I work to Q&A, we our up and it strategy team want thank hard and for

or end and Looking change in quarter do forward, the our we health attractiveness objectives our not macroeconomic strategic confidence second markets. challenges the the experienced during of

to believe enhanced well profitability as long over value our execute creation is positioned Patterson that we continue growth, term. We and to the drive strategy

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

Operator

Blair. of with first Our comes line William the Brandon Vazquez Instructions] question [Operator from

Brandon Vazquez

moving us it for pieces hard guys macro lot in the side. see and a Dental of have Maybe just Kind to you of exposure start, Health. to both all, but on there's a Animal through good

guidance, little look you in you for kind bit as updated both of talk about maybe the of your a of those the So can year? is segments rest for assumed end the at what markets

Donald Zurbay

question. for the thanks Brandon, Yes,

another I business we if think consumables as could break So you side, down bit, of you quarter. things Dental our had on see, the kind little a strong

expect to we that So trend continue.

we be year side, market talking is the equipment, kind the we're half. expecting our high-tech the or that's soft guidance through somewhat of as second really revision rest where We're of to fiscal On the about specifically the equipment equipment. the that go

And then and the there's our Health in for are strong reasons that, sustainable. lot Animal really on side, that good production another business, of performance a

So that business, benefit we'd from expect to that.

on the to of the you kind rest companion a dynamic into we if an -- back from we bit then think of as through talking the peel back year. we're little spend. actions slowdown bit that's about help side, and some saw go visits a year. Again, in in that's putting a the of of place And Think we ourselves cost of half the and that, enduring

the on well. some of some everyone's get call benefit the as that industry focused us disruption will in will -- And been

of kind through that guidance all in move put as us half. the you that reduction a when So back the in back $X.XX to the hopper, got we

Brandon Vazquez

is, And on sounds first, kind maybe -- Okay. lot the of lumpy. being as follow-up, about clarifying, Great. a just equipment equipment in talked like it we've then past, a staying

sustained but digits different. the might quarter, it's a like the rest bit little this have double decline down an a You quarter, This through more of up year. might then seems be

just So clarifying that.

that changing? unique of of business finance? willing would to any rates call to Any you interest delinquencies it financing -- you financing this could of have higher there? make the people lot the just Anything then Is on are making less guys a a equipment. read-throughs notable And or out kind equipment you view

Donald Zurbay

Yes. it take next. the first Kevin And question maybe over kick and to I'll the for

trends Hard different. dynamics month, said know, really the as in It's to take bit you think it us, X for equipment from business I X the months. even and that a was little we've repeatedly. lumpy,

at what it the in for this case, our the we at which late lot was interesting driven quarter, of as in terms slowdown miss happened in particularly of think imagine, -- the is, about the the a really right would to quarter, mitigate. the harder the is really end on talk which can of you quarter because expectations I was

some is be you the that's if year, But QX go monitoring thing, cost see of take versus mitigate to of that through that that. going how help we the to slowdown, on where that -- is the actions to with was just dynamic and saw. then the going as view really think, longer we We're timing much obviously this we okay, to we're and sort plan then

I'll on maybe then question financing. the And the let answer Kevin

Kevin Barry

Yes.

really as the that as in downward within some said, ASP So did in that And like our in those And growth and CAD/CAM unit and XD the quarter we it spaces. see well We pressured. pressure the equipment. demand here, imaging Don some hit are pressure market, that. XD declines core saw pressure price the some offset were continuing

and it a financing we in-house financing, standpoint, from mostly directed towards right, categories. those And is do really you're

demand most as of strategies external we and And manufacturers financing our we'd we're is lever keep on in gone and we that stuff a working internally. go up. as through promotional that certainly looking rates our to But driving market's overall that's And those with obviously So we're internally the year, be categories at. finance. we've the looking working interest raised the

Operator

from Our of Block question line the next Jon comes with Stifel.

Jonathan Block

to you lowered missed $X.XX Don, quarter by the the the year. you Relative full consensus, just for for $X.XX. roughly by guidance,

you unchanged. I So part bit because sort don't to little out specifically by quarter. be guide difficult a is the guys can And back that of tease know

is saying it full almost come remain $X.XX. guess I'm going seem because, more full again, year the you quarter You're a would was by down the this would to expect miss the challenging. that I where macro with

as And are like Henry there tailwinds in you a you what get be from offsetting, weaker you it, that, Schein could core that maybe would what to share talk just 'XX? I'm call are gains So do -- trying to our there buffer? a throughout maybe at, as building fiscal way we in any work what anything with

Donald Zurbay

And I QX, -- would disconnect consensus Yes. miss this there in Well, was one -- consensus Street it's our of that and between $X.XX I maybe thanks, be. think this reported quarter, a our thing bit particular where a things from in quarter, there Jon. The mention some were an results. was we to so is to -- expecting

view And a would bit miss that less a I then for But perspective. is taking in that So it little half. we're yes, our like $X.XX definitely. the number. bit out of the second

Look, the I'd higher-tech the strength we're consumables in are in second out continued the business, we're that we're things in and in cost X then in some things that dental going call November, in take competitor's our benefit particularly. our main that, equipment half the in some on actions consumables to the companion weakness of plan top doing from -- our disruption things the to mitigate we but portfolio, slowdown strength the have the production continued considering -- market in half seeing some to of and stack of second any

all into takes, $X.XX to but are math the puts, that's I And nets did move some guidance. out would main and of the we formula, that's put the call -- it out -- kind the in things some we those to that

Jonathan Block

Part on just push of mid-October. was from maybe And question, you in that first to down some your website competitor's Okay. point B

in number X% consumable ex So PPE. market, weakening up you good a dental have a did

way. that November? do clean frame So the saw month then you it my Or ask that was in sorry number? continued And to -- think some this the tailwinds for a a you just -- Was October? of follow-up. some have I'll And have of started month that of you to to see you

Donald Zurbay

Yes.

was October, benefit it a So X-week period. the in

in the putting calculation customers one $X revenue. math patterns, et out cetera. reality million against transitions, for us So this approximately your of system, of that caution the any is was just making for into too new because much customer ordering never I thing of benefit But works of way. the would October It on simple

Jonathan Block

that Got guys it then about doing it. -- And equipment because back-to-back well. backlog talk negative bit. and called gears results, how you but the is to very core helpful. where a Dental I now And just shift equipment just the That's got out you dental little Can with just sits?

The culprit core usually high longer the be seems to but has like tech, time. think I lead

I'm would, to if just trying almost core And you your like to match results. so orders,

on, So if to certain extent, the backlog. you just could maybe a touch

Donald Zurbay

Yes. Well, want try forward-looking very type get ahead we helpful I but to on I to we're not that of ourselves -- just too here be guess not say far would information. the solid us, the -- equipment a core had dynamics in in the the particularly that quarter which quarter. were that we saw softness, was for late some core but high-tech showed

good. backlog The looks

here we're we for investment time. there's show of period continued that going but And some think it's I tech, high still hang core that weakness targeted. more a happening, good expect could in there, -- to then but

Operator

next question from with comes Baird. Jeff Johnson of line Our the

Jeffrey Johnson

I gave versus EPS the a X was you XX% the might internal been. just for disconnect So for maybe talked expectations company Don, clarifying answers down quarter in have ask you what quarter can about here. But just maybe the one, consensus year-over-year. from questions between second

guess, would what have you the been I have internally And a would quarter so in that one, sizable expecting been year-over-year such contraction?

And implied second the EPS model cost EPS kind single-digit half that's be savings the of in two, you kind of or into again, ratcheting of even just kind back -- of some low to and cost guidance? actions going you're helps now growth it that flattish get that to is the the

Donald Zurbay

Yes.

it's the actions think cost of combination and I benefits a of some we're seeing.

comments Maybe a few on I'll that. turn it over Kevin Barry more for to

Kevin Barry

Yes.

quarter onetime going we about and the year, our in last this say knew I'd terms QX, compensation what expectations, benefits incentive think Jeff, repeat to that comp a in not specifically, in I were stock year. we of few had

So we into have expectations. baked our that

that was relates center mentioned here software and that to going comments. some Don and investments some quarter, And knew to ERP in hit. making we also the spending that this really his investment fulfillment we then of And had the investments we're

line what OpEx for was expectations. we really think So bit the I been equipment had our in quarter. high-tech where like baked quarter -- our a the that I we we've we're that from deviated it and knew late the happened expectation think And that late all was to into saying to. then us react And in that was happening our for so swing

sort QX what was was of that on. So built estimate our

Jeffrey Johnson

even for that's little I the back some a the dealers And are helpful. one maybe weeks just for there issues. hearing the in are number from the That's on quarters you private Okay. question, than X, frankly, given of October, cited, The their of guess, that's just then, lower you. tailwinds, $X X, smaller Xx cyber X million I'm a that follow-up out that last than Schein line, Don, probably number, the X

that to number sounds low me. just So very

One, weeks do get -- for because those you coming sure continued have you the how of to think hard cyber it's Schein into then be obviously, quarter issues incremental tell to we may the several that number? Schein what customers I'm to do maybe quarter? where impact how are issues. But or third about

any sure you watching that obviously we're but your ill I'm on issue of it competitors, don't wish is closely. an

a that third on the longer-term we'll how share those So about basis? might from see, contribution we temporary happened maybe gains or, some think of quarter do have

Donald Zurbay

would I benefit really. [indiscernible] Yes, wish I yes, particular Jeff, this mean never any just said. And it. competitor. anyone and you does not appreciate what reiterate one I on

just really the X to when the there left started this was to weeks come light. But in quarter --

sure into your would start to to idea And own of to point lot us, so I to it's -- so serviced that people fold get not get linear make kind -- ordering lot people appropriately. -- the going that started. that customers your that are to to their a There's again for

compete to obtain say, -- competitors, the again, other And for but is our including do frankly, we our thing competitor. vigorously I'd that business, so

And so they were customers. working to keep their

So that's you of that. how look kind at

would unfortunately, and to, be too I we're able we -- November, actually month. on just much say November not the we're finished to going give color

all that of closing starting process and the information. in we're So out mine to of

a I would with at get have pretty to we -- say to that that I good has precision a process number it. some think

quarter. the that $X number the about we good for feel I million gave So

get us. played is initial a into to we'll some trying the of November, the what just had focus on customers how some we things was setup, that little bit that see sort The that out. to those just to happened behind help were October you out. didn't of reacting more And As that November of that's able thing

Operator

next of comes from UBS. Our line the with question Kevin Caliendo

Kevin Caliendo

back waiting come we isn't come expect us decisions to out December? for time, price are bit the they are prices declines to are about want decision-making. little selling you to price to canceled, dental is like how being year? Are I Or much trying account get a we the back delayed delays equipment think price ordering or next what's waiting? and just are just versus the down? and stuff in -- understand right these actual we versus to talk in I'm this like or meaning everything just behavior happening would a pushing those Or And if market. for maybe average the to year of

Kevin Barry

Kevin. is Yes. Kevin, this

I one statement out it's that kind tough market. are blanket think make the all of with in the there decisions purchasing to

a mix the of opposed in as here trade-ups the We do a price bit to business we saw of quarter, seeing of sort our some declines unit we some business. just -- we we're CAD/CAM what look is of our see sales. unit saw new in combination at -- in when think a I data, more

of we average then And the there's as that our imaging together I and bit. selling the these certain practitioner built think baked how it's And That's are into baseline for kind the There's put in cycle equipment. guess, forecast, equipment. the at replace they a just piece down replacement at business. of need a categories, come prices a our -- a point, of we types all seeing of to I always on -- we've

like seeing. to right like over would promotions, And new promotions I activities to And headwinds do. said, demand we we of the some on show as said the that to other we're I our some and financing that in go teams drive through are up working quarter those earlier, promotional of through might break purchasing that try above

some market Now kind we've been bit of by is. still have restoration-type talking business. buoys results of treatments for does when next of we out come really kind situation a about of is standpoint, as what even X and and X us core we the the demand patient the noise, customer What strip bread consumables business our for see from It hygiene good our X their and we of months, underlying that's our manifest kind a butter depends year? kind timing and individual in, that as the in looked customer months,

there. people the that should dentist, that -- are buoy of that So decisions and the traffic the to going we out still practices should some of investment know

Kevin Caliendo

quick Okay. or Are any sort shape individual from way, seeing follow-up are you different that a is, behaviors DSOs DSOs conservative being form? versus And in more just to of practices?

Kevin Barry

to of by opportunities ROI, expansion I equipment before. what see It is, out. say is practice drive DSO what the kind fair depends which the they to team their their activity the at play with and side customers. good think which kind on really what down compared -- of working dynamics seen traffic I our slow state some the is our think practice our we've to what really But their practice of in better it's of through sales is invest to same

de similar there novos a So the than but within prior probably are dynamics say practices. fewer I'd core years

Kevin Caliendo

what and I cyber that Do to happened question. because there ask them? there due gains permanent has your think happened their for there what you a with happened follow-up -- is share if any what has Meaning competitors you changing is And is Jeff's think any -- to of you like been that permanent share attack? can market to

Donald Zurbay

as we that that. tell was, it's can you could our part to too customers had imagine, at We strategic working be on and to of think long this potential on like would with looking early I view term. -- be

So remains focus. it that's be But our to seen.

Operator

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

Sameer Patel

to This Anderson. Sameer Elizabeth talk bit OpEx. just Patel little on I wanted a about is more for

elevated that as as to well integration of a SAP bit that this mentioned You related kind is facility expansion.

What should of of to those moderate in step-down are sort related the to some also, quarter we what of projects? the levers of kind X expect the And you next pull costs? those completion can

Kevin Barry

add any has. he can Don color and start, I'll Yes,

bit down step-down, right of talking Canada and wind offset. the of we've year, a In through timing rest here the the go NVS a have the the been gone think terms investments to of now. I live in as related and bit we expenses of as kind a We'll warehouse those the see about those are the expansions implementation SAP

but QX. moderating of see QX, some So of kind into that we'll in

going offset a were accelerate year. go of we sort investments our rest to to bit as But I that's the think the be software more as built of through

that there. Now committed business, to -- and we of as still our Don has see the long-term potential been we're very part real saying, and

those we're we through year. going protect investments go to as So to work the

term the go And on sure for cost actions doing of of commitments we also really that. that through to under here in That you that things Don sort mentioned, having offsetting to and you're activities the terms space this, our of more the like as be for tighten discretionary the that and the that can We're those at looking closely are year the and a kind when deliver it's your -- business. on. our And investments year discretionary be fees travel long of going make we'll is we make things belt professional like spend.

Operator

comes question line of from with Allen America. next the Lutz Our Bank of

Allen Lutz

Kevin. for One

Can consumables you're weeks weak different to Was than into October the that saw talk out you in you Is past what You November. over was in said there quarter. trend September? anything And the any X that there? then over call any about early equipment insight seeing the quarter? the

Kevin Barry

out very we kind the think quarter. in within saw walked the big quarter. shifts And through saw the of I late any wouldn't month-to-month call I trend Don impact you

bit -- back how we've back we our line. for our you kind at this by see performed of us, on strong honestly, look if team to fiscal kind year May consumables of a really But to continue whole performance and going step the

we we've quarter out, on and well end get you we think We've the this with that PPE team our think trend through. is executing been of customers. had the to really share working here. performing when were a We And our before some headwind even that strip

call any big So within I shifts the quarter. wouldn't trend

it's I think that our well, really showing teams performance. up in are and consumables executing

Donald Zurbay

Yes.

Just of maybe and -- one just clarification. point

weakness -- think were really would month -- in more the just for October, saw more not I not on last X the as really really I of the sales the characterize it equipment we last weeks. the

Operator

Stansel with comes question final of JPMorgan. Our John from the line

John Stansel

was was you within of like? Kind should that dairy? driving of production. a one cattle, acceleration on -- stronger us I fit pork Sounds sounds what last in pork, quarter. that it how like know Can of Just sense give bit a growth,

mid-single-digit number? think fair acquisitions way about And any -- to more a know I growth an of in you've translate then to Would the done from number internal production of that space. that

And call think then, out anything back the timing shift seasonal mentioned as final half? you it, to of about we just I guess, part on that the

Kevin Barry

and kind diversifying we've to that. about That work really I'll in talked reach that try we excellent mean is that then of I one business animal an the think team has done I'd the we thing job and species cover both prior production -- and I industries. the about of those producers serve Yes, veterinarians our calls. say this in how

the of some and we always cow of straddles really, quarter good of the quarter-to-quarter, But And QX [ every downs so ] a between see and it's so figure fall dairy ups is and bit beef. and QX across going our impact what swine, little kind was quarter, out run, to performance to exactly science all. the be. art timing and this The

they customers really a can I but meet and think really we for share. are. message of that's really And us where And servicing have we so diversified differentiator that so the team we've presence some kind the well, their again, customer is there got think I gaining that is the really omnichannel --

acquisition part an services part the Dairy really called acquisition a now key is our a it's that side, animal in say of that dairy made that business is performing company which really owned at the the we've Tech, brand On but it's this well. I'd portfolio, of business. And overall point, production relatively the small

really standpoint, customers overall from really That how small dairy and numerical an integration But that expectations is relatively value. it's an service has performing. from our a those team impact. It's from providing that well gone overall

Donald Zurbay

interest Patterson and All talk X to in all for right. Thanks we in Companies, all time and today -- Thank you sorry. for will your you months.

Operator

you today's to now joining and may like now and you us. today's speakers concludes thank for thank presentation, all our for call, I'd This disconnect.

Patterson Companies (PDCO) 29 Nov 232024 Q2 Earnings call transcript