Patterson Companies (PDCO) 3 Sep 202021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Patterson Companies First Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I’d now like to hand the conference over to our speaker today, John Wright, VP of Investor Relations. Please go ahead, sir.

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

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

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

taxes, found section we contains no about The for Patterson per Inc., including at restructuring is information our a or the reported income events shares of gain before the along internal Please Companies, any comments update and the deal income, market the in this markets press quarter September call based results integration these estimates. impact adjust for accurate Patterson attributable operating effects analysis the as provided and the business addition, conference rates with morning’s costs table Patterson conference time-sensitive the statements to are is forward-looking of date attributed items. this date Inc. income growth to investment XXXX. upon revise of share attributable Company’s can and tax of or Relations website note live obligation an reflect net related X, namely the after and expense, GAAP income, reserve of amortization, presentation be slide diluted that legal first adjusted this and Investor call. expenses, earnings to to broadcast, the Companies, will financial call, only XXXX. of net of of our Also, release our serve, The circumstances content we tax fiscal measures, reference to income reconciliation that in in pattersoncompanies.com. undertakes In

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

fiscal call. to healthy deal as and And to welcome pandemic. of Thank quarter hope COVID-XX the your ongoing of you and earnings I Patterson’s safe with everyone impact we continue the conference you, John. all first XXXX families are all

COVID-XX, key were the pleased of per entire In exceptional of to hard the Patterson XX% we and ongoing I the I customers to and our continues be these speak during focus There operational uncertainty I objectives indispensable in performance in partner our provide Patterson grateful remain when quarter of work, and the times. three behalf and leadership for which the executive our are challenging FYXX. very share. performance from know on we of service, team, say first drivers team an entire dedication quarter. face on earnings and the Patterson’s adjusted and disruption in the resulting growth with We’re our strategic focused our first year-over-year of delivered Board

revenues First, each markets month quarter, our than the of and are in sales end first expected. our across trends and recovering momentum improved faster

decreased quarter businesses. first third fiscal of XXXX. entire the in of Animal And for Production July first Companion month sales July, in X.X%, improved compared first growth to year-over-year year-over-year and fiscal Dental, the of our Animal our month each Patterson to sales returned sales the quarter internal While quarter,

adjusted points support to improvement basis our margin operations of achieve X.X% margin result of execution was aggressive strong saving quarter. operating Second, and we This an the delivered and cost XX measures the operating of adjusted sales, in corporate by teams.

of entire to Patterson responded a and degree our team with customers. has high to passion Third, the challenges recent serve focus our

and continued implemented overview I’ll by the the momentum the situation help customers we and In trends materials saw along segment, progress we we business our developed color with are specifically Our of and by on an sales our the first with the first we support team evolves. Patterson’s as improving start the trends quarter. and deal some quarter encouraged quarter. observe COVID-XX of Overall, recover in financial my pandemic, programs our first designed range of challenges the the a as to today, has from with wide impact remarks through performance in

an over results. provide well face However, do to ended of those some to I’ll detail ongoing our to we’ve COVID-XX improving our as we on effects before uncertainty how also our markets of pandemic. trends, cost in to overview response provide the financial actions savings related of Don the continue actions turning business more to to-date, it in as

for segments the Let Dental first followed by our sales quarter, Internal XX.X%, quarter down fiscal extremely the segment. recovery were in a first steady in start to our start challenging me first market. the reflecting with Dental the

To April period each our of fiscal then, sequentially our approximately sales down improving in and the month year-over-year practices perspective, Dental compared that by seen in in year-end fiscal various were deliver Since could call of segment earnings were sales mid-March local As Dental fiscal of guidelines, business discussed to XXXX June, only year. and regulations. in dental conduct close we on accordance shutdown same our in as a emergency first the procedures and reminder, ADA we have month XX% to put XXXX. required state last with quarter

to Dental compared X% our in July grew segment XXXX. fiscal of fact, In July,

sales a who and shut most was address their down. backlog during traffic, the opened months quarter not the the improving patients see first category Dental performance Our corresponded to practices Within our their were back patient the COVID-XX consumables dentists when by impacted segment, offices began of dental increasing our to as during up did pandemic.

However, trend the recovery line also is encouraging. here

important XXXX. sales first positive to the consumable Patterson of dental of and for practices growth as they believe have served sales needs in a an be to final month to July quarter Our ability differentiator our customers. It’s posting reliable source turn gloves, also year-over-year restock of the high-demand with to personal supplies, rebounded as noting protective proves that double-digit in meet other fiscal masks, to July, Patterson’s offices has their fiscal the worth We equipment. complete compared

certainly sales. PPE of While as a has it represents portion our of consumable consumables grown category, than XX% less still

increased of an drive customers. product sales to provides includes options higher which for portfolio, the for PPE private our opportunity margin Importantly, our label demand high-quality PPE

practices dental were shut our in their down in an were quarter early nearly sales solution sales branded quarter, digits amid We label effectively continue position the as as private choice we products the dental in always Internal our paused down. of the as high that offices equipment a customers our to our certain see portfolio best for in provide we making uncertainty to single our products, all customers. increase them first in so the category investments alongside of

However, the financing dental offer our began worked first traction practices and portfolio, Patterson as to to with manufacturing across our quarter. attractive closely during equipment reopen, partners promotional gained offers which

can to need. provide equipment in reinforce and dental offering the our trusted technology continues recover. Patterson’s customers support business. willingness the customers quarter confidence of the our in the and services training closed. entire and an financing, service Importantly, value-added including to and to customers first the product lifecycle and being services first equipment ended installation, with a in continued maintenance seek have proposition Patterson technicians invest limited future as our to repair, We with of the the customers’ in of quarter, ongoing equipment very the access important revenues their design our our who and practices indicator core Early backlog, service value the practices our In for software, health had business, equipment, they partner

categories our to ability and other month services execution of value-added first sequential our strong experienced support improvement provide their driven help and and Dental, each quarter, top-line practices. customers like effectively teams, by and service to more the with resources within within tools However, open dental restore our field additional them

significant in on their performance Dental essential the the pandemic considering COVID-XX caused to segment, limitations We placed and by patients. with to care the deliver the disruption are dentists the very-pleased

to pay that the several investments years past for we’ve demonstrates our made Patterson. performance over customers for and off continued Our the have

in deepened sales value service force, our and sales developed several our value-added our teams, to full-service services, we past over with dental a we and the As grown as productivity we’ve and only has our expanded XXXX. Today, experienced a invested through focused said, months. delivered remainder and tools for and That have credibility of our and our as will customers. remain relationships partner and deep fiscal challenges move trusted unknowns team being the proposition

were predict the when resurgence and patient levels pent-up difficult sustained we fiscal while and to it’s during closed. Given the expect demand dental return the to quarter serving our of how patient of in ongoing impact we offices uncertainty, much resulting demand, can traffic of the observed pandemic normalized first was a

for of in our three which encouraged improvement to fiscal all uncertainty, While are in our second And second and due segment. first of August, we across our the the rest quarter, to Dental trend year by Dental month business. remains sequential we visibility the quarter continued fact in the our categories see the continued revenue is limited in

challenges the performing growth trend pandemic, first sequential the are disruption an was each in were quarter month Health year companion first pleased fiscal in growth Animal in better than responded essentially base veterinarians their for segment care pet by flat our on the client attentive quarter. adjusting work-from-home time, business to sales as same At unexpected very companion strong the owners. pet pet performed a More first expanding our for driving by with of markets. the an fiscal caused care. recovery recovering fiscal the businesses capitalize Animal owners considering continuing becoming animal business, we’re which with and we the the our into pet pet with animal the and delivered ownership. business August. allowed faster execution by increase in the production veterinarians, owner animal now Health, performance in prior proposition Both, on and value and Turning in for This reflects strong of are during of had Patterson flexibility focused first continued production new their animal their to have the Patterson’s animal recent COVID-XX lifestyles, to also offset operations care with Americans pets end Internal in our encouraging desire how growth of increased the their and focus sales quarter. top-line of to companion quarter anticipated

existing our as these just such customers, Patterson us but only positioned they deep mobile well to professionals to services offerings opportunities and veterinarians equipment the their for provide services need a that of and most include the delivery navigate and of them apps these relationships products, Not also building and facilitating Our technologies as prescriptions. home with branded practices effectively array serve veterinarians, to challenges. have support broad

and the NaVetor improving quarter. our manner owners in each in first veterinarians to develop closer connection The animal extensive set the trends delivers software In fiscal management and help the of also and addition, serve efficient possible. production of them demonstrated business flexible with tools most sales a an cloud-based pet month practice

swine supply been business year-over-year production several the slowed, prior market its dairy production shown was recent partner processing beef the business overall while their animal growth chain recovering of to and our team know of due more and impact market the challenges that COVID-XX to the challenging months. we is has customers face, the in shutdowns in onset been indispensable our water our plant Exports that fairly However, past that the to portion has by market bit, how has demand operations. the resilient in been protein our has customer changes years, the The a in have yet pandemic. highly is as a return valued adapting capacity. animal to to customers our on Despite the occasional and to market trusted

delivery technology customized Our deep ensure and health team and models wide with help works to disease herd market a exceptional service providing support. of while prevent products range expertise, and

in and cost the discuss forward. first Before the the call operating business I want going to disciplined I impact controls, our turn to margin over on our quarter Don, briefly Patterson’s and

range to eliminating discretionary we events, initiating we expenses, wide aggressive freeze and As preserve reduce projects non-essential a communicated in canceling saving meetings all including liquidity back in-person headcount cost and restricting travel, and a our all sales both, measures spending. of all April, capital took and

In workforce. ongoing liquidity our Combined furloughs our first temporary and helped drove operating salary with and the margin improvement reductions, addition, initiatives, reduced adjusted Patterson quarter entire preserve margin execution saving across implemented these cost hours and strong in our work Paterson’s improvement strong positioning. measures

Looking ahead, many savings remain of the for time in will cost we’ve taken actions being. the place

reinstated earlier, and in sharp our the back to other as by downturn trends ended caused to response be salaries to levels. reduced August nature of pandemic. several we and designed furloughs salaries temporary However, improved the I normal were furloughs measures, described the cost including On business we Xst, to the responded in

organization entire sacrifice the back the increasing of flexible first the to I markets, call our sincerely the to to all end our up recovery their being meet dynamics quarter to and support us the the want months. detail. additional turn cost actions in execution team sacrifices saving the And customer actions, this to over success now, period. and performance take said, And our walk flexibility our prepared in made as confidence we continued I’ll our more our materially to through coming strong demand. for scale in in remain gave Don change markets thank That to deep end Patterson. Our employees These of during and

year. sales And compared adjusted you, same for first a quarter a sales currency X.X% the Patterson of Internal Thank the effects XXXX our Consolidated reported translation, good morning, to fiscal quarter the decrease versus last were Companies for $X.XX which Mark. everyone. decreased billion, in of period X.X% year are first ago.

COVID-XX for as steady Companies initial of As Mark the impact improved during mentioned, to growth pace a year-over-year sales Patterson began the at internal the sequentially from we quarter recover pandemic.

improving pandemic. While dynamics needs the and as our wide effects segments, benefit also sales supply execution performance they range recover began from we aided of revenue did to is our strong of of the meet the both in market chain by customers our from to

was most quarter decrease mix XX.X% of as was basis a net XXX and related by points saving described in down over first fiscal margin points XXXX. percentage year-over-year year-over-year greater first first sales Our cost gross a margin of the the decline year. operating adjusted fiscal a Mark to the this which aggressive favorable executed actions period the was as on basis was our COVID-XX. that Segment contributor XXX of quarter was XX.X%, first than which month Dental closed to Adjusted our versus expenses Health dental the in primarily Animal In X.X%, the in remained practices segment same experienced operating quarter, we May. a the a for volume quarter sales basis, response to segment first in consolidated quarter, primary as adjusted improvement XX-basis-point represents the our prior

our has operating drive for a improved quarters for efforts quarters, volume. improvement improvements margin impact segment the As along with and to as of posting six a sales discipline, higher consolidated the adjusted number expense operational year-over-year of added past of leveraging result and you mix of recall, our

during margin Expense significantly We’re COVID-XX encouraged another quarter. to contributed improvement our to the this continued related have quarter. operating actions to for first

pandemic During and began we our of to as discretionary took disrupt the necessary the quarter eliminate fiscal expenses. to promptly the business, markets fourth XXXX, actions COVID-XX our

of cost and cost that reduced At was the estimate the to in or quarter, workforce. the end that across eliminated. million salary these we business, of expect were majority and other announced, of some implemented the first we previously temporary $X.XX also of quarter work that actions per first recognized improvement $XX the onetime share We reductions the there benefit reductions, benefits were periods. in given future during from not do As we furloughs hours our

Companies, rate XXXX quarter quarter in per income XX.X%, tax investment adjusted diluted prior first the or which This which share. first million quarter a Our was deal year. increase. XX% XX of diluted of well and restructuring This Adjusted $X.XX $X.XX of points was and for to the gain the compared net costs of first attributable the to Patterson the basis net trends fiscal as compares prior first reflects execution $XX.X business Inc., million totaled an decrease focused the or sales excludes the savings attributable reported year was of or Reported reserve $X.XX fiscal for diluted year quarter $X.XX to income legal net in quarter, as year-over-year expense the sequentially ago. amortization, in share during per or benefits $X.XX the per $XX.X the first Patterson to sales. over quarter income This improving XXXX integration of to Companies, share. to compares million one or Inc. $XX.X increase quarter and million COVID-related $XX.X our a represents drive the and the expenses, first

Now, starting business. segment, let’s to turn with business Dental our our

in to along When the see reopen in and recall, governments in patients various and were state restrictions you offices adapt to April reopen, in American severe As control. to down response COVID-XX. with offices to on Association offices June. shut infection started other did and dental and patient Dental changes Dental to May placed had scheduling dentists local

quarter same to decreased dental Patterson’s fiscal down first ago. sales and basis, a the our of the Dental closures year that compared quarter the sales first XX.X% and the in of impact same consumable first quarter, X.X% in of for period were sales continued early decreased business the Given quarter equipment supplies XX.X% practice dental internal versus On XXXX.

value-added software and In addition, the decreased in services of first XX.X% quarter. internal sales

the quarter. trends first sales course the sequentially of mentioned, Mark over our fiscal As improved

In our call June, Dental sequential XXXX on and Dental revenue approximately performing our in mentioned and down June, start we of to dental again. year-end only Dental opening patients emergency began as execution and help month dental our our revenue the market reflecting were approximately most customers offices total the improvement offices and was was in year-over-year down fiscal XX%, reopen the focused seeing closed As in XX% earnings May, procedures.

dental in first double Dental basis-point X.X% Our improvement year. were by and were XXX first Dental and also in of year-over-year on Adjusted consumables benefited to where to even volumes. a year-over-year up performance from margins a the our which actions basis. in the gross was sales growth taken margins grew basis. quarter expense quarter, X% increased July savings driven compared the to month cost prior improved a further the decrease business of slightly the revenue expenses operating July digits on Dental we other variable related in operating from reduced strong

COVID-XX pandemic business Now, on our business, Health Within our to to animal Health let’s impacted move segment. different a the companion than our degree Animal much our Animal production animal business.

pet During May closures was month processing market while adoptions pet production utilization animal the basis in lower of plant spending year-over-year and plant the impacted and continued the increased a pandemic, the on by quarter. throughout

offset first lower period lower X.X% first year a Health our As points quarter quarter, and volumes operating the the Health lower prior in XX margins were sales of gross year compared we as of by Animal were were the business up to decrease the fiscal the expenses a basis same finished first ago. Adjusted margins. for to compared segment internal operating sales fiscal Animal quarter, flat in

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

activities. XXXX, from $XXX.X operating fiscal in quarter used first million cash During we

million cash the due included cash during activities of of the decrease Free To compared a of fiscal $XXX.X level during we is year-over-year $XX.X decreased our statement. two fully the receivables increased amounts flow also We calculating cash quarter the The flow, which have in our million. working of table the explained flow, $XXX.X appreciate purchase total free to XXXX. release, deferred cash use an within section in is XXXX, price first is press these capital. investing of fiscal of primarily million which of the quarter, collected to

to during second our XXXX, of quarter we declared which fiscal $X.XX of allocation, shareholders. strategy a In execute then dividend paid fiscal capital quarterly first to per XXXX. was to continue the on quarter our of the to return Turning cash diluted cash we share,

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

fiscal some continued XXXX. its Mark. And guidance are Let fiscal we XXXX me the conclude financial uncertainty Due call this over operations, I and the back impact not turn surrounding comments at with providing on will on outlook for to to now, business pandemic COVID-XX time. our the

I Now, before our entire take and and want team. thank questions, up your we again wrap to Patterson acknowledge

And And of now passion pandemic. to of initiatives the has the distract proud day will shareholders. uncertainty our and momentum and uncertainty take our business, with our are our investing people, on stronger of essential we in not to serving even continue the strategy the they same value We focus us their by Patterson certainly are ongoing our remain customers, our we deliver the related Operator? first At and the to to we’ll our that, customers become executing not as teams to in key impact quarter in your every this support while in services cautiously truly bring and given an optimistic, communities. provide and from time, COVID-XX encouraged questions.

John first William Blair. of Kreger comes from of Your Instructions] [Operator the line question

open. Your line is

continue the have Hi, been, rest we the back fiscal you through move year? the improvement the curious, of to level, assuming as guys. trends as t on of continue they margin bring have for the kind detail. Thanks line structure you think more monthly very a all you much do can Mark, as cost normal

ask to morning. I’ll Yes. Don chime And good in. John, thanks, certainly and

any And variables truly I involved. continue coming it’s going amount And things markets a going to still of to know, certainly, before there’s to -- stability fair further. for early in end you chime still Don to I But, we how predictions are a us and months. our across think, period of make would the to want forward. play need factors understand in certainly we think I’ll some to, ask see out

John, appreciate little all mean, or guidance look, bit here be I watching this want careful it. predictions And carefully. make uncertainty. I to to given the we’re give just Yes. we very think, a I not

I think, has can kind how so you at of look progressed this far.

I think, cost move savings the where pretty I there’s at But, QX the quarter expense the about million we at. we’ve savings to same QX, quarter been us mentioned, that helped. in that by first listen don’t of expect in the as helped $XX encouraged But, we QX. into recur and time, we’re as

So, what’s there. there’s on to want this with margin. wouldn’t speculate I But, to balance think in forum happen really a we going good

great. in home is delivery being view? an your among in mentioned us I impacts companion. seen area And pet home owners Can pop And is Okay, in the Thanks. remind interest uptick I you or delivery sustained has whether Mark, P&L? another think, question. you just heard that an Thanks. sustainable that how your

via onset Yes. of Certainly, with benefited home at delivery partnership It particularly from pandemic. demand sharp we’ve John, space, increase was the pretty thanks. increased in in the adoption for home the animal certainly Vetsource. a and of delivery companion our the

going back pet eased of I are rates as late their have owners -- think, tempered certainly these vet. and things have to obviously restrictions

with with owner customers, and is that pet allow tools focus value helping really proposition technology full-service on connect to patients. tools, their our them for really customers, our providing their giving them that So, veterinarian them

service Vetsource. via an again relationship relationship that with our benefit provide certainly that view veterinarians, to the as we we so, just customers. And, offering our of And overall part with the our we

you. Thank Okay.

Thanks, John.

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

is open. Your line

you. to two to general If questions. consumable guess, was that to ask surveys I your on I and XX number, maybe you about patient or August with wanted start Good of and July a we’re to morning, slightly points, guys. industry in different look take just XX dental volume presumably wanted number feedback across volume to One, better seems seeing business. similar That Mark, the better. just if I growth be the at sources. I X% industry, than

So, versus that be wondered, help do volumes But, of points XX revenues or maybe that of that. are Number if us bridge much one. help with And us think, Thank so on rest might you bridge agree can I you XX maybe better? the why that? you. PPE. gap

thanks. very -- and in trends -- wide downturn, helping Certainly, of on improved customers to productively customers obviously, dental the And I key Essentially, our over reopen May, And we’ve we’ve is they their Yes. months. the couple past saw a been several somewhat we as seen that restore a range practices. and faced last on by challenges certainly of get safely, moved period, really where reopen and here our March, very-focused back right, line on track. the obviously curve see the the we’re think the volatile Jeff, over months. we’re encouraged we’re sharp and seeing April,

think, PPE to of in that not an go some of we to terms of pent-up demand, time. as the do for that in particular, some able consumables expect may the I patients been obviously dentists period extended obviously were have products, et have of their looking appropriate cetera. the they been Certainly, PPE sourcing the are our of has supply also to sure make of products as PPE ensure customers patients, contributor, safety their a staff, to

So, I there. number factors in think play of there’s a

start some over see dynamic of stabilize to time. the and your between units firmly think variation position see of Don really we stability I and is revenue of as the see, and want we play to think PPE point, to some the mentioned kind where and before, provide out to want again kind guidance. future, a think, indicated, to going We we’d be to I in predict certainly as I

volatility. some So, still there’s

obviously, we’re pleased, really We’re with that seeing. improved the trends

that on momentum and We’re seeing drive see up pleased units. focus consumables saw ramp demand. with, continuing the as is, some starting think to there’s dental to of And our back I we frankly, we’re what we’re patient we pre-COVID our team’s revenue and with offices

I equipment maybe That’s How mitigation down that? than maybe that us think Thank quarter as of helpful. of quarter bit to for purification Thank feel next had the the and aerosol the maybe on Is the on of in much like question of quarters, the That how couple you of quarter, another air in a dental then, did better about similar side, the The the a XX%, two side. thinking. And sustainable stimulus stuff lot itself think some would from help or that? were what equipment some be that any maybe helpful. is means helped? you. the you. well? And tailwind How a little or do

Yes. Look, Thanks, think we’ve I I and also general, our recover Jeff. we equipment seen than think expected. in better technology

we consumables think, is certainly somewhat. would interesting. previously that would But, as more we thought we I we there believe ahead, dynamic say, look that And it’s up quickly. really still I ramp indicated,

the productivity them staff that And dental of kind terms it’s helping these making I look, dental but air partners to our profitability technology our and patients, investments the business. and And be and They’re prospects. of We our of think, of continue investments our promotions customers certainly that would the of watch I see improve helping a working not obviously technology ensure purification, to our of customers equipment help more portion and as their a their to safety sign certainly material and overall The in their to practices. we’re are a positive say productive. equipment to portfolio. practices. invest recognize one Our their and in it’s and the support manufacturer of customers closely with factor, view to programs and health

technology. continue where this And, think certainly our this we’re in really and our as value. we we ourselves we to to see that very-focused of the the is marketplace with obviously So, benefit And an months distinguish really the lifecycle is frankly area customers the customers helping practices. I can an certainly, in equipment continue in ahead, where invest to and continue area complete believe

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

Your line is open.

have whether meaning about little from the any was equipment, quantify in purifications sales aspect to Maybe sort but it sort sales, safety delve quarter, deeper But it’s how I into this incremental we it? how equipment way. you or post eliminate when to of trended? if equipment much of ask or totally And other Is question. to think of orders? can orders of that that the would COVID COVID-related the things of want the a bit new shutdowns, sort we way improve that maybe there productivity,

has Kevin, various I better into -- thanks question. down kind our that rates that I reiterate segments I’m what I far. We get area than and were. made we equipment those in not specific Jeff’s for comments mean, the expected breaking the technology to to going the question. just kind and so of been probably recovery would of the components of

fact We’re customers that we’re our dental encouraged to very -- the in by are invest practice. their continuing

are to see certainly I to think nice that help in feel kind again after efficiency We our demand them in help in equipment weeks as from really But, of pent-up from now practices. offering. equipment backlog we like from shut opportunity mentioned we think, a they offices standpoint, a profitability category earlier, being see I as core right and make our down. an have safety some, eight investments their I of going productivity this certainly an a standpoint, did perspective

value technology And I So, as for think, again, they in that that said, can a I positive full them. I they’re recovery the far recognize lifecycle we think, expected. the our better bring investing practices and the do entire of equipment that than seeing we’re we as their to so of customers, kind Patterson table sign,

not break to smaller category chunks in technology the And again, answer time. your of sorry detail, going not equipment to more just down our and but question we’re this

just you one cause expectations to that you burn was of flow, you cash some capital flow going that was for I mentioned quarter. working Any appreciate sort follow-up. And expecting free the talking don’t just in the you Are guidance want in about I the general, know, provide color really primary of there quick the sort but can forward? that. provide around reverse? of to No. cash

Yes. Well, I think -- this Don. is

careful worked we that. fourth through cash way quarter all that of careful help the we’re is the the with that you maybe factors look the pretty particularly, month think pretty and with and I were as that accounts as to flow can payable of imagine, our that we April, and our at

we ultimately back. through positive in a worked of quarter. impact quarter, But, came had fourth that that the kind first so, the And as

kind it’s that timing think I more dynamic so, quarter, XXXX -- fourth And dynamic. a of of of first fiscal quarter

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

Your line is open.

of when comments Mark, your your get there’s the are kind on kind like the of of in a number Like, you kind but practices seen be might up bit. getting delta I little potentially lot you’ve it’d view at that maybe of that are that of just it’d in kind of versus that a demand the from on of and on underlying great view restocking demand. play, things growth back to pent-up up that appreciate impacted look we procedure much following your of demand appreciate get how I at kind here. helpful period we’re maybe And, factors in August, kind of of factors have in be maybe place seeing. business. a much feel and there’s how of the to But, of be this on improvement cycle the kind you running of mix, kind the where like may

predict I predicting kind of volatility. be level of I forward. Right? a expect a of question. where us exactly thanks. of Nathan, we’d And in see Yes. we be would we to we mean, before lot of think, going none think comfortable I period want in certainly big I a some what’s the in And here. to that’s happen stability can period going we’re think what

monitoring, we trends, you guys its obviously for out. indication us specific rates? sources, -- are trying specific to well. here, And things right And are going how so, that what know kind thinking as to many internal products triangulate just against reviewing to use associated these give our are external I that factors types revenue think as what will the I our them trends, obviously unit of data think continue literally involved out, end There’s so to there’s I significant of the with bottom-line now the think at all expect basis some of that that think the big trends, current the so at factors, obviously, I curve slope daily it’s a And seen our some be of markets. with many difficult And stabilization, point. assumption how purchased. by specific I there’s just variables on course. being of will the we’ve that terms the products improved certainly on here best certainly continue far. things we’re is, and obviously there But I encouraged play grow we’re pandemic different putting this a continues in But, of play change too And and affects are clear to now, really going to pandemic

there. the thinking I what Could And first on balance be And the just think color maybe you performance. year, working flow in maybe talk quarter? free drove Okay. follow-up cash the cash the appreciate about over capital the the we that you how as should about of a flow? performance about

Well, mode. the pretty were end were kind first accounts in think, that, our end still year cash just working of pretty how instance a fiscal our fiscal which payable where amount fair mentioned, think year, We payments and of capital we we element the flow. was performance, the pandemic, affect you end there at obviously the the we’re Yes. that careful of the as we I quarter, in of a made I for versus look were I But, at in given if the of during managing at significant QX. timing

there’s think play those timing of I that are some of here. elements So, in kind

guidance if think really see a think, quarter-over-quarter what experience. year, fiscal you again, I look normalization of the without you I more flow over balance free cash trying to is give of here, the

-- that’s So it will kind normalize. of

you’ll in the timing than year. rest a of more of was there element the QX see think, I

questions. for Thanks the

of Your Kevin comes line next G.research. Kedra of from question

open. Your is line

Thanks for taking my questions.

wondering you’re side group maybe trends those in seeing First, could investments building the willingness seeing and to larger independent patient flow difference between you in just you’re practices equipment some on what any if make businesses. if comment or practices, into

practices I from private think practices. up early think, bit more indeed in recovery what were that DSO on I the the data, than ramping saw very the is quickly of we some a

the flattened and has driven that DSOs, the large as categories date curve I practice really across national think regional well. recovery customers, our really private DSOs and really broad think I certainly has to of been right,

largely I beginning to DSOs. open practices closed private similar the at now. we is the rates the are volumes saw are the largely And that in at So, patient the we’re think difference that seeing that

the just you of encouragement dental to we the optimism again, the terms the the of obviously, of about cautious we potential feel certainly result has if And pace continued any of of a that light continued and good kind view recovery in broad pandemic. in so, caused and stability, market as changes again, point. North recovery, as in will, could where be But, that recovered this a the America of

you will And business spoken to term? that’s start then, road to see past few months, that When that longer going a past as term, months be last really more have within few looking at the and or could over months the with around changed to happened the things part few the Patterson and down being COVID. kind and of the thinking industry, you’re about, something we’re do that now a of way long past things guys COVID going in you how any you you’re sticking over the potentially that be of doing in anything the kind either be where mid changes forward

It’s question. Yes. a good

term we’re performance. we’re through this improving But, we’re that driving focused of to And do has certainly our continuing this making that with sure focus And all, our First and period crisis on have making down we still work during to heads improve recovery really to certainly and good progress. pleased we’re the near continue period. we’re to period, team responded and performance really think in. on this our during I opportunities

on get longer continue markets term, be the think I continued expect you likely we end we the the to accelerating just those market sure as assuming market saw eye we’ll And against were an restart of ahead. some -- but period of that strategic about may that recover, we pause on full think, that I now, stability. -- take and we exit those button the at for we expect, continued position when started. in pandemic do down back the we And that, the the normal to we thinking our new the trends making as evolution full look the obviously, would in and pre-COVID and the the I certainly advantage pushed with number looking recovery think, a opportunities in But, of of future, towards the can how efforts road. primarily what we’re to in opportunities and remain some certainly how a focused opportunities -- months putting and like, taking

Steven Your of comes of Valiquette line from Barclays. next question

line is open. Your

general gross margin question around I PPE. just had a the overall

heard that think, mentioned I if you just sales under it represents you consumable right. of XX% your

We a within healthcare just bit? wide hear trends about about staying compressing around PPE on of a the for array And your pretty ultimately more or distributor, little own your all or trends same increased or PPE. that seeing to PPE other a end But expanding so, seen other that transactions, I’m distributors. as you Want have for on margin gross costs your have margins COGS book? guessing of the are acquisition product distribution

around and our our weeks. coming And make to any expect clock bit general. get specific gross sure of think customers. and into Yes. terms PPE the chain Steven, of changes the lot continue talk meets supply there’s I around fair in little still standards we’re to in just sources Don while work about of and maybe I I within that just margin we the trend the say, new chain supply situation high Maybe in a drives high the of has the the standards improved, constraints, that categories numbers can availability, to our PPE to product -- a of But, and that cetera. improvements really obviously, I’ll we’ve amount certainly, earlier, see of a et got don’t as would very pricing, identify mentioned continue product the kind going teams, disruption obviously segments. to supply in specific with and

that terms of and We’re certainly onset on in the of going keeping the a how situation continued forward virus. close could the eye affect supply

the for the represents several indicate, months As stabilizes months. our consumable chain us in I percentage sales. the ahead. And supply than XX% certainly mention, did grown certainly, decline as over that PPE did has I of total less could last it

think, seen I variability. we a fair of pricing have amount

products think, as which And about a private category. label our our I have certainly, label PPE mean, makes label, think a is private PPE portion we up question to than products. your rate I category, bit, certainly here our get higher around good to of non-private gross a margin

PPE continuing been certainly that has label And to encouraged know, going have forward. focus you don’t there. if is that continue for of penetration by of products. I an an add certainly ongoing that’s and anything to that many and for area to quarters that terms expect in here to the we’re So, Don, we’ll drive contributed us at contribute to we and our private introduction Patterson

not think, I to But, Mark, the color you we’re mean, not I a there of helpful. lot No. be good topic. on gave trying

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

open. is line Your

for Don, maybe first one you.

down were better the margins general that If just down And quarter. just gross consumables why because and Health hear gross companion profile. segment flip gross production, I a a more on there margins, you believe GM sort to was equipment has then of were was some up the better surprised guessing and bit side could to in overall was margins Animal the hear surprised little elaborate think I promos on equipment I’m were than than and I companion

you and free then elaborate segment level I follow-up. on could a the had at maybe a GMs bit just So, just

Dental think, side, side, Sure. sales, impacted Dental cost impacts cost and some related you of actions Well, -- or take cost a just are that the of the if to I that significant. actions lot variable the the pretty

the up negative as some sales So, good margin. somewhat do lower ramifications nice mentioned, of extent overcoming production though, our I rebate business we quarter. do there, Health think I a And of that think the and to seeing some really have impact in Even of volumes then, business you the was to the Animal on side, a and impact is the you’re companion what had really the on able decline. work there were on

bit So, tale is there and is one little little of side back bit margin. within some the a some of two Animal of the on and businesses had a forth. Again, impact a of that Health

Okay.

time onetime, all it think the just that might It OpEx maybe -- I fiscal a what between a and separate comments, follow-up It use guys. So, margins. of in can I’ll implied million Thanks your PPE around was was dental $XX And of consumables be so your question. to for don’t just then just then, resides some layer per it within gross original sort of there. that we and second the in somewhat year seems second the like OpEx. XX% necessarily XQ, math question in split the seems, mean, ago?

sales. T&E you cost be of as move fixed and more your entirely to was those reduction in The your the didn’t of that we that’s terms Those the are The of benefit have we the aspect, the commissions to variable -- question there not expenses. the costs, Yes. move is OpEx, obviously first the forward. $XX in include really cost we my the really, million of was really, more which expect variable, at reductions. if That we will, first don’t type amount frankly. cost to just way or is get part cost That’s would of looked almost question that will

I’m And sorry. it. Got

ago, PPE, the year on a roughly? Just

What the Sorry. was question?

I’m sorry.

a the For a for approximately fiscal around -- was ‘XX. XQ of ago? PPE What it current same dental period consumables think, quarter, this percentage I quarter, was XX% current as year

say Yes. numbers. but half those between two not that I would in -- somewhere

your Thanks guys. for Got it. time, Perfect.

you. Thank

line next Sandler. Your from Bednar question of Piper comes of the Jason

is Your line open.

for wanted equipment Thanks questions. Mark, start to morning. here. I taking on dental the Good

or shows, revenue dental how your hoping you and your lack I’m you discuss pretty peers trade practices equipment. these been multiple think strong shows? the the do and shows, virtual lead or around than of amount historically nice consolidate expand rather stimulating the you dollars over view Do and trade months to trade end can in just Patterson to will demand? trade shows adapt spread these up Solid generators of just maybe for you on think will out

thanks. the we’re in dental new market. shows dynamic here with that coming into and we’re facing general think Jason, regard Good a season months. getting just to question. trade Yes. in selling in events And I the Certainly, all

And manufacturers you, so, out. play to how exactly with we’re excited I think, work obviously, will now. knows the really one our right about that’s no that doing we’re I tell going

launch Our earlier event. manufacturing this to -- a customers now, partners we’re our right broader events well. reach idea we teams a in fact and up one there’s with in have. in talking went week, value broader in customers getting which our certainly, the the to in customers much different of technology terms very We and fired much DS And, And matter manner really as together array than of particular, obviously, a of of the did large Frankly, format engage is you World of the virtual doing it a and typically about and while tremendous their products getting allows virtual and benefits supporting audience. of investments. a a

are that a the selling are on certainly going have we that the effective be. events that to are in question environment. But past trade have execute and shows think certainly, we able all success I focused we the those these So, in ensuring to of how virtual

benefit you going I terms reach event. possible. wouldn’t have do some that or in with those learn virtual the we’re ensuring But, so. as can to these successful think six on around very-focused virtual in-person there’s And a an the over events we think, lot months tell events we’re as next you are typically maybe that frankly that I that of

with sure our we’re we’re focused that successful and really those are teams So, on are partners that. and working closely optimistic our making do to

Patterson’s picture on Maybe M&A or a from here. wondering for you for Really Don. just one bigger appetite follow-up, Mark just

the balance The a we time. everywhere probably look. see gotten are sheet getting much in You’ve it’s spot been valuations often you extended some really better than in quite

to versus your on capital M&A for thoughts allocation? Thanks. other interested be in appetite of hear say sources environment this So updated really just

I’d play weigh kind this Yes. Don of mean, I in. trying certainly, then focus button pandemic think the quick right may things a continues pause continue of kind comment, an continue I interested But, continuing eye certainly and mean, a out think on to earlier just what through be through period future restarting the and scenarios to made we getting here with the towards point that as to things can the frankly pushed some we’re on, I now, stabilize. and reinforce to I evolve. as and had to some we’re of the of and

that’s So, bit little of that. I’d view say, that general capital about a more kind a certainly, have. may of element point Don we talk And of the

as you top Yes. definitely return shareholders. us. (sic) Glen, we I [Jason] saw aspect continue do for that, to of important a really think of M&A, our it’s dividend mind to

Mark as in we have in balance out sheet stabilization but things, mentioned, a play to to our going I little and how that a see we think we to spot. see need good need -- this more is as

really right we’re in really, think, with we happy I the of spite pandemic, sit where now.

be at end just there’s use we’ll once that more on a definitely focused see. stability bit light we there’s good this. at so, And in terms some of as tunnel of capital, that the the And a can looking of

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

is Your open. line

the follow-up rate exit Thanks taking a I Mark. on question. question. Hi. for just Hey, my wanted

mid-single you think, a business then, July. a absolute that Is said on both? in saw improvement. Dental rate you you basis, business on up And said, the an that July think, in I the growth I separation was or revenue double-digit in X%, but consumable August, basis was

rate on say, a basis. would growth Glen, I

And that July the So, we’re grew that in mid didn’t up so positive are encouraged the that and had single you August. far certainly in consumables seen in think by we numbers that we correct trend July. double-digits our we’ve was digits continued

Although, early quarter. in the certainly it’s

laid I volatile work encouraged think your somewhat the trends to we’re improved are continue numbers accurate we a out. And yes, to by continuing And period. hopefully look, we’re you certainly answers So, But, that see. question. those that through that

all might much maybe Did is growth on little run just at throw be maybe final aiding on side. then, miss rate? I Did gains you side? last you the comment that Could August my Health on out comment one Animal on I’ll Health rates how the And a market bit that? the Animal share

QX. improve think but companion August trend animal into and specific commented from we think animal don’t fact to did continued we numbers, I I in that comment production the both lines our our

I the teams. and still the with pleased momentum on performance some sales over Look, we’re our in right bottom-line pay But And and pretty terms And think it’s we’ve and Dental go several volatile. focused at the I Dental we’ve we trends in look, both certainly to continuing of team pre-COVID. patients. trends. executing to Don we’re wide the investments want a investments the well. to that we’d position continued be those both, a last seen we what to of we the position and in saw indicated ensure do with And again, think, to -- in and performance, I continued And in improve that. stability rates have a and got that all especially think encouraged our We now, dentists seeing very of be, growth business believe as taken believe our our to Again, that’s that help drive a the safety kind we’re certainly growth again, But look I, we’re we’re several what future obviously, results. months. very we expect in safe by we’re improved I of rebuild and within we’re top-line predict I think of off. And in some to to that we develop times, pleased service to regaining our dentists, by encouraged we’re see a our period business dental and before precautions business. made the their with think the before our staff period be some range rates we and is momentum business our predict as our we’ve would where results in Dental you

Okay. you. Thank

Thanks, Glen.

speaking the look thank a forward think on today. want of time I results. our Don appreciate again your all we We behalf everyone have you that’s Have again. I, certainly interest your QX I and I and report just to So, we today. with to questions time And Patterson. for when in week. thanks again great

conference today’s concludes call. This

now may You disconnect.