PDCO - Earnings call transcript Q1 2025 | Patterson Companies, Inc.

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Operator

Good morning, and welcome to the Patterson Companies, Inc.

First Quarter Fiscal 2025 Earnings Call. Please note that this call is being recorded. [Operator Instructions] I will now turn the call over to John Wright, Vice President of Investor Relations. Please go ahead, sir.

John Wright

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

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

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

our the results these presentation and are rate items. can fiscal of our release the the reported in we XX, provided as that tables call reference statements be date about any call, broadcast, revise or for and that Relations of reflect update a internal time-sensitive company's serve, financial growth comments of any note of measures call. slide reconciliation upon XXXX. press with are tax-related obligation swap conference impact no our Also, the interest quarter rates found adjust circumstances Investor analysis is shares, of to adjusted at events The this amortization only to for 'XX. addition, the this and of GAAP conference of Patterson along contains based to of including will deal effect various the forward-looking we market In undertakes the pattersoncompanies.com. Please accurate date in or the information first website section estimates. The in live content markets after morning's August this

sales adjusted These substitute as being sales not will and to and measure swap. and XX net currency an for release, week. period net our GAAP of measures starting impact term to use is a rate internal the are cash for is the discuss free available earnings will in foreign We a represent also call replay the defined of Time results. X flow which non-GAAP impact Central be a to at intended today be recorded of a.m. non-GAAP our interest for exclude This

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

Donald Zurbay

customers and Fiscal XXXX detailed John, First Conference review to Thanks, persistent fiscal our drivers than we'll year discussing segments. Patterson remarks of marked reflecting my and by contributed that at performance our declined a environment anticipated. the on a dynamic in factors our rates results, year-over-year of general macro to everyone, inflation, which quarter Patterson's will slower each first we start had then the Companies' I elevated interest a of basis, evolving the results Call. XXXX today Quarter the including to and by consolidated year and welcome, begin financial the look operate, uncertainty. And we

first results our a quarter. fall expectations of short In own these few the additional to headwinds, our financial for caused addition factors to

lower-than-anticipated our in was First animal financial performance business. companion

the is make to decline line also we less and on strategic While within decisions year-over-year first focus the in animal top the part companion on driven segment. during quarter, macroeconomic more of existed the that continue business profitable sales to environment by sales

and ability the our a As to margin sales impact rebate had incentives earn quarter. based also on a corresponding result, these decisions impacted during

Patterson's results. medical timing of an first Second, further increase unexpected impacted including claims, the expenses, quarter corporate certain in

Patterson's fiscal the whether QX occurred, to and from Healthcare completely outage of prohibited Change most lack certainly those these these disruption the the medical to remainder the attack in or As services a self-insured a our for both by anomalies Change software entity, Fuse the their occurred that XXXX. segment year. And large Dental Dental insurance our using Dolphin, submit of Eaglesoft, fiscal our processing, the cybersecurity at given category claims being costs Healthcare for insurance to value-added cyber normalize we customers, our claims on we and of able point customers Dental a a caused in with within occur A a have in reimbursement. When reimbursement by significantly was utilize of and fee-based Change attack causing expect Healthcare providers. submit greater-than-anticipated portion impact can insurance that integration finally time, over insurance

customers fees During the service. these does time it of the outage, to unable the to this normally charge for Patterson was

were identified is Dental to solution taking for quickly alternative attack, longer cyber the we While impacted our the solution expected. this than new that an from time software customers transition

our fiscal adjusted services that for help the a make approximately e-services basis, On to customers worked per related share deliver impact In quarter their estimate year-over-year of teams those software are sell to fiscal addition, management unable during the diluted category. Both these plan of attack we entire and first on other hand-in-hand as we previously first greater our actions this transition to services the of on services $X.XX financial and disruption, expectations includes to negative value-added were to new were time Change same navigate to to of transition XXXX, EPS Ultimately, sell new with provider initial for we teams mentioned cyber a the the the position dedicated Patterson unanticipated delivered factors, taking the this quarter. and a than $X.XX. XXXX. for our and Healthcare. In cost up products light inability time

we On in initiatives core are to variety improve our can intend our profitability. There to objectives. the of enhancement levers we the That with operationally. prioritize continue we side, and and strategic keeping across said, in are long-term investments implementing entire measures organization to a discipline margin pull will expense cost growth and cost

effectiveness. as incentive strategies as opportunities and promotional see including the management On pricing side, programs additional well we and activities, accelerate demand-generating promotions to strategic

causes quarter. with our And the I core come competitive XXXX fiscal growth are to discussed, While the highly were reaffirming strategic we underway believe quarter just factors back we confident to unique strategies our expectations, our in remain our of strength the did opportunities. Today, investments underlying we not meet to in positioning earnings the our business, guidance. and

remainder First, the reminder, end Looking for focus line are to strategy, fiscal year a achieve the with areas designed of the the objectives: is as above in forward, our growth our build second, fourth, markets; best X long-term strategic current margin improve drive made progress rates; serve and revenue to products, third, the our growth market and optimization. and performance; services end enhance channels the efficiency our evolve customers in upon we've to which,

on in compared of first each business to X performance segments more year. provide period during fiscal detail the similar our I'll XXXX the financial last Now quarter as

declined to Let's primarily the X% start first due fiscal a year-over-year X% consumables. XXXX Dental, Dental. of sales quarter with Dental In decrease to compared internal in

infection of compared deflationary Dental X.X% consumables control quarter impact the certain products, decreased the of internal of first to XXXX. fiscal sales Excluding

We last this forward. tougher year year-over-year the of QX expect events a decline product our not that for Part the impact macroeconomic market-driven control to of ago also relates the negligible in pressure going infection environment in occurred reason occur portfolio be a to that other period. than but did consumables deflationary Dental

also cyber as these the Additionally, Change are respect during are this ensure ordered who submit consumables category due Healthcare could they who to levels experienced With this customers sales us impact teams with working with to and a return their we fewer our attack that also customers, insurance easily have claims previous they us. identified to to ordering not period. greater-than-anticipated from reimbursement for

decreased environment. sales last Internal equipment. about We this current Dental to macroeconomic believe decrease from Turning X% the reflects year-over-year. year

continue digital CAD/CAM inherently year-over-year gains equipment nature category, digits, We underscoring the double to categories, lumpy each of comparisons for also our the face partially our core declined equipment challenging which business. in in by double-digit offset and

customers And mentioned, ensuring spending for life the ability leading and long dental and during continue are in through cycle, moderated a installation, first Patterson's purchases The to this, was reputation. to technology As Patterson training, quarter repairs. we practices. equipment earn the to entire value Dental we by from led and of and unchanged. rates has to remains and rewarded unique interest throughout to market proposition purchase overall our cycle that support in committed challenging equipment market. the maintenance dental economic the higher consumer levels equipment Despite Lower quarter recognized the financing time

declined Opinion, And meaningful to cater I'm hold services underscore preferences. To our long-term enhance our highlight value-added and for setback internal Dental category value-added quarter Finally, the the prior nearly service change in evolving we're view gains and cybersecurity to X% products, drive to investing attack. pleased that our that in end, primarily productivity period the Change due customer sales growth. that existing opportunity developments does to X not commitment compared first integration value software. our detection Second year Healthcare That Eaglesoft software to area. integration to the recently This announced innovation Advanced Eaglesoft and within enhancing in Patterson's Pearl's AI this proposition set, Imaging feature our successful Second enhance new pathology insights and by dentists. We directly into This Pearl's captured patient clinical advanced detections care improve clinical in workflows set directly real-time to adds Eaglesoft. and feature X-rays presented accuracy, to diagnostic Opinion streamline providing AI-driven of can

management Weave these the software now complete within platform deepest, Dolphin. for exchange in most announced client new practice Eaglesoft leading practice are available management. Patterson Weave and is We integrations a integration And dental solutions new also dental Fuse, the features market. engagement the and data

data, their patient appointments collection, through enhance the modernize With their is and dental ability payment read ultimately facilitate with new business. their practices the they patient ledger equipping confirmations illustrate these grow and write to integrations need how to Patterson and to practices, experience information tools

customers. proposition continuing our comprehensive management promote offerings confident and that maximize solutions invest of our We value dental will are services our and to deepen helps our to in practice value-added all

to rebate walk enhancement indicates to that corresponding and that adapting ability the veterinary to that a combined quarter. initiatives It's are to on revenue our data improve our to areas with margin underway growth drive also year-over-year business low-margin initiatives, Health environment opportunities visits. on from Now in that most by year-over-year let's parents current traffic which, pet profitable in practices to the important animal opportunities In value to certain the to for had line top the other Health moderation XXXX, from low reduced fewer away growth, choosing declined note to our have Animal in first and by move This X% our growth business companion of was sales market fiscal as our animal in on our single offset to in focus strategic production Internal companion the was the approximately clinic by animal softness division. Animal line veterinary the segment part digits. some modestly sales single-digit drive decisions top sales during spending profile. Market impact in declined expected growth. Deliberately achieve by margin our internal reinvigorate driven we certain incentives our intentional quarter are more low segment. finding

Our on teams focus continues positioning market. with to these to focus coming products on be value new proposition execute our customers' to aligning innovative while evolving our

animal as across in production the in animal business validation of its production fiscal generated momentum Our the strength tailored strong XXXX. presence, species. single-digit our We performance and our continued growth distribution internal see of first quarter sales strong strategy highly effectiveness and low offering and of omnichannel animal continued comprehensive

system This Our outperform the category the efficiency. team's the solutions cattle The business demand value-added our Turnkey strong animal our that suite sales help driven with the by in to resource enabled and win strongly strategies ability provides market. Across and their solutions performance value-enhancing Turnkey, strong platform and customer has quarter. resonate segment, operation our planning these base execute solutions in high the our counter for delivered part customer our single-digit has broad growth and to Health comprehensive production first to of enhance market-leading enterprise e-services. and internal services macroeconomic was us tailored end-to-end pressure, illustrates needs producers, success of to broader to software robust their Animal for continued provide new streamline

equipment Health for differentiator our support Patterson Dental life us Just proving market, full value-added our to the in key a our be Animal customers. cycle as for segment, the enabling to in of services are

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

Kevin Barry

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

and reported sales, Consolidated X begin Companies covering Internal our translation over margin XX quarter of period. by quarter net last adjusted an let's XX.X%, the sales 'XX. currency year. Gross the to impact quarter same was quarter 'XX for for of fiscal swap, basis fiscal results ago. of were billion, increase which the are effects the the first So X.X% $X.XX compared first rate of compared decreased fiscal 'XX a in Patterson for first for of the year an period interest decrease year the points of our to prior first X.X% of

which gross equipment We accounting interest also related gross our business margin associated swap hedging the adjusts gross financing adjusted portfolio but gross provide our the is adjustment affects measure mark-to-market the financial a impact instruments. that non-GAAP company margin, to the our within metric of rate of accounting The margin margin financial not the the and impact total mark-to-market of segment. for

impact the net the the on fluctuations income. mentioned, rate impact previously a As minimal financing swap and between net has of interest equipment portfolio

year-ago a decrease margin, cybersecurity year-over-year Healthcare. the period. segment on our XX For due primarily related the fiscal the 'XX, shortfall in gross revenue points of and in to adjusted to profit Dental the our The Change XX.X%, first was decline to compared of basis margin quarter attack gross

migrated While percentage a of we large our anticipated. customers we have to new than processing taken the has a transition longer platform, claims

mentioned, and impacted a has their some Dental with Patterson, work operations Healthcare flow the new to software. our cash business the their flow in they processing customers attack with disruption cases, claims of Don the as As reestablish on to Change cyber related of

effectively diligently the to manage our most practices to their to them work to practice solutions help productively. and offer effective continue operations their teams customers reliable Our with assist and and most

with levels quarter replace high of fiscal sales first in and a to focused stream sales customers XX.X% net this a are to as return ordering expenses that these first previous operating percentage Patterson. Adjusted of percentage us We the revenue of their compared points In as in ensuring the of would expenses quarter on prior basis of of business first for XX 'XX, 'XX that quarter XXX spending comparison the a investment P&L The decline level consolidated of quarter driver related medical in first margin higher our is had quarter higher the of fiscal quarter the to to 'XX. quarter 'XX, in declines software by well to unfavorable we the first our and items. first year. impacted as of fiscal were consolidated the to operating for ago first of majority categories the issue. the to a the decrease related operating a from adjusted basis last margin year-over-year X.X%, account the margin-accretive of with Change of points was The that compared the X primary unfavorable comparison fiscal year year. In adjusted number was in impact Healthcare our the

Additionally, operating mentioned. deleverage previously in was unfavorably impacted items operating expense margin by

Our attributable fiscal to increase $XX.X $X.XX of million 'XX related first Inc. the was last the impacted or Reported Companies, the share. income XX year-over-year or of attack to adjusted due income by share within net Healthcare and the compares adjusted of lower Patterson to million continued of of operating in segments the to income year million an tax quarter of prior of Inc. million XX.X%, This This Companies, $X.XX the to first Change were that approximately reported negative adjusted compared the was Patterson XXXX in Dental of income per fiscal per compared was in business reported the Change fiscal both rate net Companies, decrease net first the 'XX. year attributable sales cybersecurity $XX.X share. in 'XX Patterson and first fiscal basis to value-added $X.XX income fiscal quarter reported first quarter points The Inc. of quarter or diluted services or diluted diluted impact and the margins quarter the diluted period. for of first attributable in for estimate category share. Adjusted net quarter cybersecurity both to the per to negatively $X.XX retail $X.XX XXXX prior the fiscal compares share $XX.X diluted to per and period on the We in in attack Healthcare. segment. quarter on is net $XX.X first 'XX per

period. In to to with to of ago. compared X.X% and price decreased quarter first sales products. X were X.X% first Dental sales year-ago the equipment business year of slightly fiscal to consumables Dental impacted fiscal the 'XX. non-infection fiscal of continued of compared decreased segments, fiscal by turn business certain decreased the control deflation our sales for Dental first the internal of infection compared of in of Dental quarter to sales first quarter let's 'XX, fiscal X of products Internal Internal our year in business. 'XX, compared first quarter In quarter starting X.X% Now the our control 'XX ago internal the decreased X.X%

category specific sales vary the in of from to well. dynamics mentioned, Don As the quarter-to-quarter, these each categories as apply product can equipment and

quarter, quarter represents This shortfall in decline CAD/CAM sales of due as This core to was the operating cyber year-over-year year digital in 'XX Change timing our period 'XX, posted growth, operating over expenses. compared to Change investments XXX-basis the a negative margin category of impact services fiscal period. of software first attack the which on of certain Internal sales X-ray the and adjusted in value-added of reflects as decrease Healthcare. The a margin point in continued in prior first the year business the period. Dental quarter the Healthcare equipment year-over-year X.X% over prior decreased year of sales X.X% the fiscal well the on impact primarily prior positive the and attack offset cybersecurity the by

compared our for Internal Animal sales of production move the fiscal to to quarter the -- internal Health side. fiscal period. first our first business In Health increased in Animal single business our for compared digits by the first let's prior 'XX. low quarter X.X% animal sales first decreased the Now to 'XX, of fiscal quarter year

continues approach the our animal well prior production companion of animal digits relationship to production year deep by to Our mid-single decreased 'XX and with execute animal team the business with customers. Internal quarter compared the market for first fiscal our in in multichannel sales period.

compared vet visits of X.X% is first a focused strategic margin While was segment line decrease shortfall shortfall to related is I'm business. The This in own resulting adapt to the to accruals. companion the top basis ability profitability. prior decisions and primarily on operating profitable the our adjusted and market the continuing on to points primarily the and period. down in in to and related more model prior our Health execute year year-over-year, and our the 'XX confident their are products fiscal year slightly Health to business maintain coming decline innovative to the new animal XX on Animal impact their in market rebate team quarter, Animal improve revenue from

Now flow let cash items. balance cover me sheet and

X of 'XX, in first the cash months the months we to 'XX level fiscal to was During free of early U.K. the capital our lapped footprint primarily year distribution in improved fiscal to the compared made same year-ago period spending the due increase investments as by Canada decreased we a and X first $X.X of in compared X the period our fiscal 'XX million This to flow ago.

capital allocation. to now Turning

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

diluted conclude dividends guidance 'XX, earnings diluted are repurchases. And $XX repurchased $X.XX to fiscal shareholders $X.XX the adjusted our with 'XX, of of through the share million of shares of earnings per during returning share. total also fiscal range a fiscal first range million to quarter for to We $XX.X we $X to our of guidance and $X.XX share our outlook and of remainder reaffirming 'XX per GAAP today, thereby

and As on and fiscal remainder we accelerate are for commitments. deliver operational mentioned, initiating the financial the sales targeted costs our to Don of our year actions both decrease

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

Donald Zurbay

Kevin. Thanks,

our our our it footprint open that the announced promote an thank strategy our deep we on reduce strategic I Responsibility with to as values. Patterson first Q&A, work an team proposition we to supporting and highlight Before in for Patterson's on execute release to Patterson. focus serving to Report, effort a want of to which their workplace, want DE&I the quarter, entire hard XXXX alignment organization I inclusive XX, focuses a the in differentiated Corporate they customers challenges a and customers. Despite commitment our on continued up carbon company's we faced value August expect and for from maintain

continued concludes to performance position in markets Looking in take proven strong of to the and Patterson's combined glad strategy term. That drive over we please forward, open our will execution be positioned prepared the us we which long remarks. confident are that operate improved the resilient make questions. with Operator, well line. end Kevin I our

Operator

[Operator Instructions] Jon first Block from Stifel. question comes with Our

Jonathan Block

of animals. in Great. quarter the Don, companion your with like lot parts it of there Change seems commentary were around moving a the some and company for

maybe So markets magnitude July the even company just these Dental? I for the think exiting can on bit quarter and for specific. some you again, notably more the poor the a of would for miss suggest little industry. headwinds little of time But trends spend the seem August, a more bit end

on the And X any ask past color be granularity give over can you would follow-up. my the more helpful. to So or markets I then end think I'll months X

Donald Zurbay

Jon. Thanks, Yes.

you the the that markets, worse. a necessarily in I it -- phased a rest think the if consumables of with traffic. traffic. I think the much I expectations, had back as quarter the I we at throughout forward July with miss ripple that mean, continue that X of think we through lot dynamics are I steady would quarter, patient bit the things not think the in Dental talked I contributed the do to as you year, necessarily look view all an view But were Dental would we through some about as I seen don't say primarily to really our quarter. on side, that traffic them saw patterns we the go -- if Dental issue we've first end to our don't the to I we that can move we transient overcome. as we from business do things reiterate,

think steady. patient traffic the I has been

production the there. we strength animal to have On side, continue

end high then up at an on think executing And And mentioned holding extremely of our of slightly. some So are Vet level. the well. are top the Animal those or I visits of is markets we piece very that, some companion here. down team Health

kind is slightly, I think are the visits visit vet up. but of per the down revenue

there's -- So a the little that's past. to bit what of that, similar not but that's had in we've

view as I markets underlying the good. So

here I impacted think quarter. we that transient have some have things the

optimistic As this used the put mentioned, our QX, budget guidance. transient to is have reaffirming go in through ultimately originally we X in markets why together we the X, as our them we position and and assumptions lot got to and levers which overcome And back forecast we feel we to opportunity particular our and of good kind underlying the case, piece. I a of about

Jonathan Block

some the focus helpful to soft, just on with just Very of consumable number. the of Maybe on up. you on culprit it. Got color. follow-up. It clear the again, did surprisingly -- what's Dental a but going seems commentary, a be Change. stuff was bit I'll It

up consumable of still there cash catch share possible like Dental from would some subsequent a within call and mode you I if we Is sort in don't Patterson's would, that's is number? see back know in, capture quarters? there. some if out those importantly, throw to the pulled feel within company perspective, a normalized But do So staying the it, flow most you customers maybe domain, if of consumables?

Donald Zurbay

the some that's saw. the I I a we Last I main mentioned, in last July, was change thing contributed patterns think particularly we we strike, think is July, the tough carrier. I in quarter would -- out, if it in do there that -- which with saw. lot had No, mean which potential cash in think to throw we a trends late some dealing of to year mean flow fair. I some again, remember, comp I that timing. I our and Like in think did with saw have were other ordering our the I we but customers with of a have July, you UPS of quarter, external --

last at against there in July. so end this some that number QX for impacted July here and stocking our And was year the that there, we're up of up time

So are record markets all But we about where I that the underlying also feel were. those from And timing several and perspective. my again, We've had get ability to we our think the track back just good quarters. contributed things over good to change. a to

at best anomaly X our in quarter mind. is this So a

Operator

comes Blair. Brandon question Vazquez next William from Our with

Brandon Vazquez

the the where were able guidance. on Maybe just talk a follow-up of you in bit for of the spot just cadence little about guys just you question seem there. to the reaffirm Can a rest last you good guys were talking year? guidance You about the be to pretty a

we of cadence the headwinds and Change that for moving past means some and P&L the implications what these how through year? guidance of think So do Healthcare for

Kevin Barry

Sure, Brandon. that. comments on This I'll a of make Kevin. couple is

we will weighted think you couple This factors EPS to about be So as A in half. and more deliveries typically, with terms QX 'XX. One, phasing. had that our the seasonality, we we're we but comp are in that in QX, somewhat fiscal of said, our performance our over That's, something still QX we the QX, on. But as Change some and it of consider issue back talked back-half We'll see that's year, weighted still Don in QX. the comments. our with had about heavily working will customers Healthcare QX of more in in the improved to issues ongoing. that our

on hadn't fiscal that software. revenue because 'XX, X claims processing we for QX remember, of in customers, essentially you cohort So had the if transitioned to of new we yet them

the So that's through one other factor then as goes will that Don 'XX. And say year ramp some our we in of that the we're actions in the that mentioned here will back comments half I'll year, those go the on. his fiscal up factor undertaking of as improve internally,

those and of fully anticipate time benefit both in will a be by promotional last get demand some also be the side QX. get actions, full and driving those year. our the kind will positive QX here from to We we'll side cost some comp baked of which more really of QX, the So on the impact you to

Brandon Vazquez

then animal. Great. a And here, maybe to follow-up companion Okay. as switching

a You done not then should but away the something more now? what I'm as we you -- headwind more could bit be move continue is there that's this this sure Or any to about think if of may segments be in exact little guys the Can talked do lessening you maybe we a word QX, bit and segments rolling go some deprioritizing, through looking a some you deprioritizing process? used have process you about Or details and to talk that's there. on is guys that from? And year, do this noise? kind little

Donald Zurbay

Yes. so thanks. Look, Good question.

we -- comment value is experience, bring. our market doing segment of margin a really this in commensurate think I value with a a with we customers necessarily customer as business much think that not interested is of proposition it's the feel just where terms there's with customer a kind in we're our bring segmentation. really We as what we and profile

some so the continue segment, extent, base. And we to customer to

on. And far this. I The fairly see acute this of most probably has and we're last think you'll down quarter. moderate I goes year that as path the think quarter impact the been

a that customer we we through where through year, position be we'll the work As in list. move

Operator

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

Allen Lutz

year-over-year if think trying a down get things. the the point, second X% together, much putting maybe of as sense wanted ask of strike? we called is ordering is frame year of more X cash the benefit is impact side. one build normalized from UPS to about in Dental in a So impact flow those first the X the That's last there up Just to the little maybe out? the less kind X%, any they're bit about the to think they're down growth quarter a with with about the the environment what kind those that way you another of of X then change. ahead saw how dealing point. And items I So headwinds, we If a from was maybe consumables comp, customers you inventory on small?

Kevin Barry

start. I'll Yes,

impact within was I quarter, think say one. the the larger the Healthcare Change I'd

we to patterns -- be as I practices was like we And significantly Don more with think we those -- as disrupt the more disruption saw working said, start that disrupted. those saw their customers acute.

dynamic that acute more business within the was say issue. I'd So our

of that issue. around the was into issues of versus July timing last Change kind impact of the kind more of Don certainly mentioned say Some I'd year, the August here less end Healthcare significant but overall of an

Allen Lutz

over the quarters? think we think of follow-up over margins we quarter? the the side, Or how Okay. companion the from Great. then impacts that think about trajectory And the X impacting just remainder for the my as The remaining about should of should rebates, the animal on margin the the we something year? first should impact trajectory about that that

Donald Zurbay

Well, I think or back our we a expectation is that through normal in get rebates. move that through year to quarter of as the terms cadence we the move

this or quarter acute bit more As I last this is little here quarter. mentioned, a

get -- So I we'll we on terms we confidence have think forward, that the we're of in track as rebates. back move

get their team record, to for have on ultimately, there. companion back numbers track animal great is budgeted they I year. our for expectations think a view back track good and the we their And

Operator

next Our with from Johnson comes question Baird. Jeff

Jeffrey Johnson

far. couple call Hoping just of maybe can clarify here from I points a the so

continue. Is Just just you've Change? monetize you those prepared to you've less is consumables impact customers, your on that, the in the patterns processors? remarks of processors you because like payment continuing alternative this would but to it sounds to is alternate point you some again, that like said maybe the one switched you things most less Healthcare, processors, of it impact Change on monetized impact going And payment over the through just well? payment because -- from expect on as continue ordering than Or maybe is those alternate any do at

Donald Zurbay

Jeff. Thanks, Yes.

practice. think view more need I the I of mean ultimately, they than definitely customers their as consumables in that latter. to it former our needs of I run would the terms have the

I were more what issue. The new than view on a getting as think our less customer I revenue Change. that timing platform on we so is And slightly per

be some and were view just process being But they come impacts is dental that impact -- that's something largely payments in to to of I way as cases, our to the and clinics, cash smaller with that on that customer continuing ordering patterns back. going we'll manage But not ordering patterns have able base best So with the a overcome. deal to to they acute payment those the going could. being something and to consumables had

Jeffrey Johnson

else Okay. they and consumables just those you, And any then of they're maybe back. not customers X went permanently coming else, ordered lost? somewhere One, like somewhere follow-ups not for that. to It's are

prior of as about can that in you I if points bit year. you acute point we down Healthcare point? So X that? put of Kevin, I confirm X.X X.X% bigger want ex that. And pin kind Was that mean, a down in Change the that UPS it the can the any the look UPS than impact quarter? more Healthcare what the the X have at shipping of Was called normalized a you little X the us those in buckets on might a Was or to buckets then quarter? consumables? question so versus was I the can And looked just then, Change of last like the just point, consumables kind

Kevin Barry

Yes.

mean last the yes, I the think, there, you're ballpark weeks issue Jeff. right I handful I a UPS year. was in think of

May, ongoing about there. But so so bit, impact, piece from just point larger And Healthcare of was it. the was obviously, volume, that for our probably like ballpark is you that July less than and a think X the into right the even if June Change

like quarter-to-quarter we So if kind still I you to kind it steady okay, you about, and a usually can think back think anyway. consumables in variation well, Traffic of those bridge more single-digit low have Don consumables some look of market. normalized you at said,

Jeffrey Johnson

customers? enough. any Sorry. loss permanent of those Fair Don,

Donald Zurbay

yes. Yes, No, Jeff.

So and Patterson. involve of I What that. is didn't getting some Healthcare don't dealing Change It -- there ways with different loss from it's our of think that customers away switched found are customers. to option a not we're permanent I

there's probably -- a customer that it's more was that losing embedded more than different So process base our moved the small a part not software altogether. of it to customer in was our

Operator

ISI. with next question from Anderson Evercore Our Elizabeth comes

Elizabeth Anderson

I little the talk OpEx side. if bit could on a about wondering you was more

talked the software things of and like the the some you higher of think medical investment about I claims. level

medical that step as the of I just think want the the claims like you're on investment. to through looks down we maybe and we cost cutting you at taking understand like expecting move to some higher then the move side. sounds that cadence you'd you're through year year it and said better anything as I sort incremental some also level software of call out, else

So just establish helping cadence helpful. rest year would of be us the across that sort of the

Kevin Barry

support year, for software the year, last last a investment the running were sort commercial in development our you QX. ramped of it then really in remember That Yes, we we software that strategic so really QX and team and into got of in up QX. We investment, when franchise. made established Dental was mobilizing

just going for year. The unfavorable I'd cost rest base we in And claim quarter quarter, of the essentially pay comp that employees' here. in will we're what kind the that in -- so an QX year-over-year self-insured the we for high so standpoint pocket spike So our out of say it's an medical a medical we our issues, late was of be have claims forward in pay into from baked unusually -- see the we activity. claims

history, Looking that back happen. over can our

created happens, it normalizes in our of those quarter. But to longer over term. when what typically, that adjust increased accrual and the cost see the the spikes, We here you have when one that's

forward, look that expectation outlook. expect an the variance we more as full be, in not our unfavorable to our to again, year and for So line we with

cost then said, discipline we're kind embedded of like up. our quarter kind first given And of so ramped start in taking I and those to being X are those be really fully QX actions think here, the I are main here incremental issues. And the impose some

So the and in be QX QX. year-over-year our OpEx benefit will

Donald Zurbay

of I Yes. levers we're as the mentioned make here to timing guess I levers, the going transient-type and is lot pull we miss -- I the gap. A pieces than non-timing need less sure add, activity. here which have a I that of overcome non-transient, we and to in we would are and just lot have is the that it the script, the think

Elizabeth Anderson

Okay.

expecting full margins last you bit year? on say Is fair be basis, are to a a So or expansion? flat of about that to little year versus

Kevin Barry

embarked trying in flat also to of area. said, in strategic I we're probably realm And protect the take trying the we're that hold we've the margin as to to trying actions. to of that on. balance we're Yes, like the some And that investments

Operator

Our comes Piper next Bednar from question Sandler. with Jason

Jason Bednar

number, what year? from if things? And to, you're mentioned back items, then what these but I exactly first, program think what -- to, here, come could I I cost see you savings, taking? to I this play you actions. in cost a of think headcount actions -- don't curious wanted this management the restructuring you're what's heard any just and of if sorts formal kind don't those savings, able Are you're expecting just specific reductions those to but quantify

Donald Zurbay

question. Good Yes.

previously the make we're think to kind I hitting have are implement ready and our So the we identified cost sure actions that really across numbers. of board to things

that -- Kevin about levers like make can you sure. for to disposal of the our things at. There think kind of jobs looking our people mentioned, our things do to are part long-term currently actions are requisitions not as harm is may travel, be we're here think and some open we're going I What and all that really is strategy. investments that at

investing our that continue balance. There's this maintain between opportunity we we're sure making guidance balance about. we that confident as So our -- which strategy, in our this long-term get very a chose -- certainly but an at to we're if striking additional our bucket, But there. we're year also into also there's looking

Jason Bednar

Okay. I guess things. X

the retaining and help yet, negotiations there? And approaching just outcome asked hasn't some strategically, Dentsply I quantification no with contract? to should like And you're investors -- then contract that an as I'm litigate they and this about you a relationship know renegotiating the call just issue but notice First, this to guess a surprised as of issued been nonrenewal after bit And I items? probably you the from this this, it contract what investors follow-up, process? talk a with guess how don't can you? I on expect but want maybe Sirona

Donald Zurbay

Yes.

on that I'd conversations on of on partners. any actions with on the give second no and with the specifics first, vendor of publicly topic, want ongoing here. I never quantification ready were look, call the to our So guess kind any comment

we're So this in common I forum the business, for things, obviously. negotiating the think all public grateful other just vendor are And our various just I say fairly would in nonrenewal-type our that litigating and We think, -- don't I activity is appropriate. partners. of

perspective, key there innovation. I they thing the deliver is our think from

and of that us there for solutions I needs customer our and a plenty to all the provide. great lot out competition for healthy we business, think for of provides it frankly, innovation the created things

which throw So and confident provide -- value potential financing, troubleshooting out but support, that you stat we training, a then over calls bit very service. And the for of to in point the fly installation, experience we're we support. Patterson radar, with million Center and I'd proposition, fiscal is little that I all Technology solutions guess our 'XX, our that under a X a and to lot had about, to and then the our you I'd other may knowledge things

but for And of last various that's partners month mean, I've quite we're think our is our value things last proposition here with I had And both so our and frankly, maybe done the to bringing about interaction bit and more thing of kind our vendor confidence nothing a the terms lot a support of and I that what customers. importantly, vendor enhance reasons. over help of my in partners

Operator

Leerink question Our from Partners. comes with Cherny Michael next

Michael Cherny

Jason just question. my second covered

year, course dynamics of on the see a the of consumables here. to gave comps that guess make grow Dental the within is will over we some that especially rate, to So back with from the and of exit I the you've UPS consumables last year-over-year I'll embedded Dental speaking, one build this color disruptions? pieces, lot we then build year. some know market get of some year. I just inventory your of us guidance, to going moving how talked and the with simplistically Curious ask about the side, view Kind sure get

Donald Zurbay

is Yes. grow. I and they'll quarter. I'll that questions the the a comments, on expectation the then few maybe -- Kevin And definitely make today understand can

think kind I X continue and take our to do have best in how can of ability share here has and been to performing. point either quarters X, I from perspective Nothing we is the kind my or to of back level. everybody last changed end thing the at X, fundamentally the markets perform that

impacted that today things to just the over-index not pieces everyone ask think we individual I'd kind are an of I mentioned mean, the that on quarter the individual I But timing here. quarter. I guess

Let's for see how the is year plays out, growth. but our expectation

Kevin Barry

to like years in past that with for essentially us. I'd goes over. Michael, that, the And other the add of we're X couple thing make, been the on, the said the is deflation I'd headwinds comments, his One now. And obviously, right Yes. abate as on Healthcare the comment year dealing focused that over is as is other then Change issue we've Don kind

So as line our normalize. of at headwind we numbers, kind top that look

more the So reported year a so, and falls that for a lot products control consumables. us infection have normalized for off, our of we past to or back get of that for number kind deflationary been

Operator

Our Wright final Erin with Stanley. Morgan question comes from

Erin Wilson Wright

You quarter, on of any versus But major Animal On support, Or guidance animal of And from year, that negotiations switches across the Great. before. launches, the but just your about manufacturers customer, mentioned of the mentioned any product how guess guess, also trends are are talked the your does but some sort see in the across I a Animal you assume But does companion internal terms terms I to well? in volume I I you dynamics normalization in your too, thinking Health, as there deprioritization for assume you'll balance that relationships? any -- and growth think of of agency coming about up. buy-sell rebate you've guidance guess, with Health? changes in front?

Donald Zurbay

we're comments, really don't changes thing there. in you vendors as know that. part flow have I focused on the of product with right related new the the is Kevin think the customers here we're And But contracts but will with no sure making process any that. coming, I'll of there whole start. to with the Yes. is working the if impact mentioned, a I

Erin Wilson Wright

Okay.

And opposed customer a veterinarian to customer? a so it's as to related manufacturer

Donald Zurbay

No, the ahead, go Kevin. --

Kevin Barry

partners that say over selling provide what as the again in products can relationships year of year, had over animal I'd then in the some team Yes. go of that reset of starts that. bag, as the business new tailwind will I coming companion products we those another through that sorry, new we for and rest here their and the is, and year we've -- past And the the have product we yes, guess and those. start start out comping in get the those we kind customer some

Donald Zurbay

it's I just that more that relation. might guess -- how the customer Yes. plays through how to

the Sorry confusion and... for

Erin Wilson Wright

Okay.

Okay. dynamics on kind seeing already kind but or wanted front? alternative that just ask no Got the to a consumables I guess, on answered, it. UPS aggressive other of online the it. you've mentioned that some that, front. directly. Got of those more competitors are some then on channel more And of just change just based I you promotional activity from aggregators the you answer of consumables questions assume is lot the of But

Donald Zurbay

some and say of the just changed. that we're and it macro Again, in position really notable. performing nothing our here. It's dynamics No, would hasn't I the Yes. environment how timing

I our last that's question. and you thank Okay, guess

next quarter. So talk Thank and I you. interest we'll the to appreciate all Patterson, in you

Operator

today's conference concludes Thank call. all for participation. This your you

may now disconnect. You

Patterson Companies (PDCO) 28 Aug 242025 Q1 Earnings call transcript