Patterson Companies (PDCO) 1 Dec 212022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Good morning. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Patterson Companies Fiscal Year ‘22 Second Quarter Earnings Call. [Operator Instructions] Thank you. pleasure the my Mr. over now is to call turn to It Wright, Relations. Investor President John of Vice Please go ahead.

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

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

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

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

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

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

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

Thanksgiving safe your off, had of performance the quarter a another in First XX, ended families October which second you and ‘XX, happy Patterson holiday. hope all and on I delivered XXXX. very strong fiscal

our our for The since comprehensive is early strong entire Patterson I as support. become our XXXX. more business there services class everyday to customers value Patterson environment momentum for and have as customers technology, acute and promise and and up our business customers on vision the value them line the offerings. focus in continued product, us of to team performance. success. our our customers trust and It’s the partners want market expertise support unrivaled proposition, importance team, and to our of well face across with reflected our and our bottom top that customers combined with world service our financial has the magnified ability with of has which challenges, Patterson’s business for our living That place formula that the trusted software organization everyday and our proposition succeed. great been show Patterson thank to purpose, help and solutions continues demonstrate to continues delivering deliver to team more resonate certainly values X,XXX Our our need to their results help in commitment to Patterson and our than and passion with

our XXXX So of the with fiscal let quarter. some that as our me start second highlights with backdrop, of

basis, on X%. internal year-over-year a grew sales First,

the per finally, And overview, now we will business and dive our the into deeper our the share. momentum given in flow pre-pandemic strong were confidence segment, our performance customers XX% operational and are in period raising a increase for With Dental and year-over-year, ago. Internal partners in Dental. our pre-pandemic a and quarter of guidance ‘XX While second our prior our each has drive compared over continued the segments our the excellence. posted for $XX year-over-year by our XX% Animal first exceeded sales that $X during XX% We to teams EPS adjusted $X.XX our value Through expectations months business, drivers of support X% internal years delivered deliver Health X sales period year to up with the starting cash ago. bit to earnings fiscal share. Dental Across sales ‘XX, years sales, to increased quarter, and diluted compared fiscal improved X Dental internal of to our segment diluted range segment for and decreased field I period. our $X.XX adjusted the in service X of million free the per

of before October calendar and specifics, covered context want second around XXXX. of quarter. Now quarter ago some year we The period, the the additional August, results fiscal get I to our into of this provide the months ‘XX September

anticipated. an patients gained a as you the market the during comfort As recall time experienced new the recovery returning to with were even faster this protocols and industry period may dental safety accelerated dentist than year the ago,

from result Patterson rapidly a the ‘XX, in the market internal with execution of products. category pricing performance coupled the great improving demand of in our for the second including ago, in strong delivered XX% As consumables quarter our control a of driven and infection sales fiscal team, spike growth by by year partially

some Given these quarter provide financial the to dynamics period to additional in of comparisons it’s performance. the believe perspective second strength back Patterson’s fiscal pre-pandemic helpful ‘XX refer the underlying of regarding year period, we of ago to the X-year to

down of the prior quarter to the dental yet X% were of second During XXXX. compared second the the increased quarter less of than fiscal internal fiscal ‘XX, compared year, to XX% sales period of consumables pre-pandemic

for compared considerably declined products we a expected, compared year of period As control also course ago. to to normalize lapped impact year. the fiscal seen of unprecedented demand year ‘XX prices as our of of sales volumes plan We have as and control infection prior unit products X this over forecasting to anticipated category moderate we pricing fiscal the in XX% when this infection and

to the expect products infection steady sales elevated demand these continue long-term. we products will over from levels However, at that timeframe we the pre-pandemic remain control and of for believe

control products years year-over-year of of of sales X% Importantly, X increased internal and control period consumables non-infection non-infection X% ago. increased the compared products sales pre-pandemic to

private our drove demand In label for increased of portfolio we products. addition,

our this offering to highly private our and drive adding in sales We expand continue products label sales new profitable category. and motivated engaged is to team growth more

in the we We market growing and perform category the product compete. in we which believe well continue faster are to our than consumables categories in overall

period second of of X X% ago. On the equipment pre-pandemic fiscal but last quarter when second side, to the years to compared sales internal the increased the compared ‘XX during declined X% year, of quarter

can products. comparing our to reminder, performance particularly where vary a innovative quarters quarter-to-quarter, has or sold successfully equipment new promoted from As Patterson and following

World highly with During program attended excellent our where once performance. customers quarter, in-person the we team our second delivered was engaged DS again and the

While fiscal reported the a quarter, the installed portion we will the year. second at were this majority this of expect of our generated in remainder be fiscal in sales event

for believe and worked choice have build chairside over knowledge the help clear to and experience, our dentistry as support this and believe customers More outstanding throughout productivity latest broadly, have technology. the year support as Patterson Patterson the and of For all of innovative category our job further continued unparalleled we for infrastructure, taking base, service And this given our large oral we is to the place. partners sales to equipment installing North invest positioned our to the to in is does our servicing base, technologies. of an to customers of team best with dental selling, their we years, XX execute offer service work there digital patients. America healthcare market, demand partner dental strong new that teams Across that established drive in in who seeking manufacturer digital customers our customer dentistry combined choose believe we improvements technology for our and is are their innovation digitization with installed entire new launch

over the several backlog sales The category in demand the our the deliveries and industry. strong seeing and and that challenges remains impacting the core in equipment delays currently given reflected on equipment are be we volumes we expect year our compared will for equipment strong with next build in currently pleased product quarter quarters. are are core X results our particularly the We the quarter, the to recent ago chain supply

the As levels. ahead has patient returned market overall, believe to generally at pre-pandemic we look dental we traffic

equipment, software will capitalizing and us These dental investing these market We the practices will momentum our give expect in in continue and dentists business their opportunities. management we to stable and continue market modernize to can confidence believe practice the long-term build growth. and the on we trends return technologies latest

sales our to XX% strong now continued compared in business. momentum sales production quarter, fiscal segment second performance delivered positive year-over-year growth Turning very internal ‘XX. fiscal sales to our animal and second and Health the business quarter was XX% ‘XX animal in Animal second ‘XX companion of our year-over-year quarter internal Health growth their of The a internal XX% second led segment, and by our year-over-year of team XX% achieving growth overall quarter growth in our Animal fiscal

operating Health label quarter exercising Our segment also strong discipline margin partners, also strategic growing our expanding delivered with equipment sales, vendor Animal private our in the working portfolio. by improvement and expense closely

private market Within within spending during of their business, label our benefit of continue our space fiscal tailwinds heightened and production companion to and to perform In animal the and the pet adoptions pet attention of brands second by the in own we increased overall. owners levels in of markets. pandemic Pivotal market from companion continued fact, both Aspen the quarter, the each during well

differentiate Patterson technology value market market. rates deep of demonstrate team’s support, product However, our believe that our the propel Patterson’s and outpacing proposition growth to growth. and beyond expertise, with these fundamentals, training our results strong combined and our our continues service, we And offerings, are

from been have has we in highlighted pet challenges. responsible or has demand challenges recent for over small the previously, Not pandemic. have customers also running As increased so, for veterinarian responding growth only the amplified which pet a our been the are tailwind strong the demand independent but past significant owners, some XX months created businesses, they also by for own veterinarians to their face only care in

training meet an Patterson that growing their jobs the products, equipment, both and all their of vets indispensable aspects and base. do of needs need As to of software partner, customer tools provides the services,

with to home single relationship journey connection throughout of and our commercial delivery to appointment, the prescriptions basis reviews. to convenient our bill allows constant can companion feedback Hero to and with establish delivered an convenient offer VetSource a veterinarian provide solicit pet customers offer online reminders upcoming greater even to our Vet a appointment achieve compliance. in regular text the use animal advance example, be offering For owner’s treatment booking, to owner to products options a of pet on send pay that dose And to

offer the customers, for and practice to we more run addition also we pet In promote tools engagement veterinarian provide helpful that vet to their owner productively. products the between the their

to practices experience. solutions access place integrated, Our of streamlined in their Market technology for an Hound all veterinary enables platform one

a enables provide opportunities vet the offering our profitability busy success productivity, customer practice vet across Ultimately, offerings customers pets. client experience. the save efficiently improve to to focus with and metrics easy-to-read compare they identify works and data helps of between automatically help and reports technology practice. possible to for our number management key broad maintain relationships metrics of range animal performance Our offices, within platforms healthy and produce to so more clinic a veterinarian collect operate the on e-services management and delivering overall best their reports care companion the This can tool time,

growth. we growth coming continued all rate animal serve well-positioned extraordinary remains and higher while pets, quarters, Patterson the market the of in to We mid-pandemic the believe the to will by clinic attention drivers we moderate animal pet over uniquely the on companion pet ahead, growth believe as number openings going is in forward. spending expected additional companion and adoptions, Looking market owners drive clinic as increased visits new lap growth

providing will practices. supporting their Our grow customers focus owners pet they with they meet and need technology manage pets remain animal to services to the companion the on of everyday the effectively their our and products and need needs and

pandemic faced equipment, contributing producers quarter, the Patterson’s serve services as ability us processing a and same veterinarians as of Patterson in span production of prolonged we heightened producers to continued our market, capabilities production trusted, through sustainable animal the become animals. our outstanding services variability demand In team an products, and reward and shutdowns the animal side, that plant health their technology, of business to the to On market’s manage and The Producers the the helping operation partner of indispensable safety the integral breadth and be companion in during we trusted and team, recovery their recovery in and them a expertise. profitable brings their a with that way, a part the second depth animal delivered results. such dynamic the market with challenges environment. have its

to our of go-to-market market strategy needs the continue in production the dynamic each specific to animal customer. We evolve meet

production animals, treatment solutions work with care an as finally, we locations with manage to operator more to and where only on owner with Some they omnichannel serving expectations. are products to With we operation the convenience. business. with large profitably closely and their operations specific market manner our customers for customers plans Patterson other partnered this the their customers demonstrates more a have customer serve animal we and products depend by a not onsite and but software veterinarian we broad prefer This customers, their on capabilities they And their purchase can meet stock our true delivery focus operation. exceed in set closely for veterinarian retail the their accounting in with their at team’s ensuring presence of

improving expected to the ‘XX, reflecting exports average, for global In finally, As herd remains demand are the X-year production steadily strong. across And we of products. have trade. cattle, have and and to production look is improve. all sizes running and continued market, Currently, drive to protein ahead above schools fiscal continued replenish dairy global dairy, and market to demand restaurants categories, swine the remainder our grow the swine and

our We them as and a maintain our supporting customers help will focus market dynamic producer drive on in they business. their growth navigate

and with markets Don now with the our all both I focus are of through first and half more to mentioned segments our details very quarter of our across three dedication pleased the Don? start the of call results continued entire fiscal over that, end we our second quarter And my about and I proud to will ‘XX fiscal and of at Patterson comments, turn As performance. second ‘XX the of of team. the our share

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

of from performing comparison last to relative of I the we our understand as within second the prior did XXXX fiscal pre-pandemic COVID-XX to a to to way the our quarter also pandemic is the more successfully the year, fiscal our how we business quarter, recovery helpful in performance period through business as refer the have markets. managed due dynamics will As to market respective

fiscal Patterson reported X.X% X XXXX X.X% Companies Let’s XXXX. increase quarter increased for $X.XX the sales begin Internal an prior year. XXXX Consolidated of year the fiscal second second second our ago. for billion, for quarter versus sales results to by covering second compared quarter fiscal quarter our of were in our the

of As from for fiscal changes We quarter this second solid relationships translation, ‘XX for believe sales second quarter the quarter continued improved effects increased execution a the XX.X%. second is and our fiscal segments. are internal XXXX result fiscal the performance both of the financial of sales recent of in and sales contributions pre-pandemic adjusted reminder, internal selling Compared in of acquisitions. currency XXXX, business our momentum product to in

margin quarter XX.X% prior two fiscal quarter basis was the this point second year. points Our XX due factors. to adjusted The XX compared down to basis gross XXXX was decline

the equipment on points of the margin portfolio reduced basis impact our by rising First, interest XX gross rates quarter. our in

associated expense offset interest on instrument, the the Importantly, reflecting our this line in which P&L. is in was impact a gain by completely other hedging and item

our mix The negative This in of It second within year-over-year, a gross note sales point operating impact improved for Animal Dental faster to segment ago. business margin important the Health to our basis XX.X% and XXXX Dental overall factor segment Health the our of were flat a margins was our period. is X XX gross than year is on grew impact the flat Adjusted over second as that had gross same second the net fiscal quarter. expenses margin. the as of quarter fiscal segment slightly percentage Animal while quarter

of XXXX. operating XXXX pre-pandemic quarter our and year. last For X.X% second points the down basis additional adjusted XXX of quarter, were lower quarter quarter expenses to XX consolidated context, points fiscal was fiscal In the this margin second our basis than operating second compared the

ongoing continue year-to-date On to top through the as first margin of basis basis, within to mix XX through expense the first As and focus we leveraging expense improvement compared driving our management of efforts a year. our on half we last line. half discipline, X.X% operating our we continue have operating on segments previously year, points margin was growing the down mentioned, the

expect in for margin full expansion in We in quarter, the the operating both the our drive of particularly total half fiscal back XXXX. year for business expansion fourth year, that will business our the and of margin segments

was headwind second prior an the the for Inc. Companies, tax same rate representing attributable ago in to per compares XXXX of per share. fiscal the XXXX net $XX.X XXX for fiscal of Patterson the adjusted income to compared and a share. $XX.X XX.X% diluted income second points was year last second the $X.XX Inc. or or XX.X% quarter attributable Our of of period $X.XX the This year million Reported in was quarter diluted X second $X.XX basis net share. diluted net reported income to or $XX.X of Companies, XXXX compared to million to Patterson increase year per fiscal period. quarter of million Adjusted quarter in $X.XX

adjusted the million expenses. As a deal net fiscal reminder, quarter second compares to per in restructuring and income integration of or amortization business This and XXXX. excludes $X.XX share $XX.X

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

relative market would out last difficult grew As we we we Dental be knew our recovery ‘XX the dental year, our fiscal comparison XX%. second when fiscal by business planned quarter year to the a

certain year-over-year on Additionally, basis. control a for decline to infection we pricing on planned products also

years our to the context ago second global comparable quarter to ago. the of X.X% it the Internal On internal of in declined year impact compared are fiscal second XXXX. back in look X second consumables that a is the to performance, Dental for period sales quarter fiscal sales up Dental of For of Dental quarter to some the compared before X pandemic. additional ‘XX X.X% basis, helpful

X% the category certain of the sales excluding discussed, by quarter, the As undergoing prior second our decreased we infection infection products grew considerably year-over-year. products is infection a in When sales the on our control In environment products, as sales is compared year-over-year. XX% current control fiscal control have impact to transition our consumables consumables XXXX from year. pricing lower

of to the fiscal quarter the sales second On compared of of Let’s year exclude in pre-pandemic consumables X% increased years that X also ‘XX. period fiscal the control Dental And sales have if of the our basis, ‘XX to second the pre-pandemic quarter increased control compared period a non-infection ‘XX look Dental of X.X% you quarter Internal take of fiscal and ago. fiscal software to compared infection of X products, our of performance second the impact decreased at XX.X% second the Dental quarter equipment consumables internal ago. compared ‘XX. to in category

equipment category in the in in the by chain impacted performance equipment challenges quarter known Our category. core the was the supply

fiscal increased sales double the quarter However, ‘XX. of CAD/CAM products digits second of in

As our our notable is has customers. Adjusted choice to is vary fiscal Dental the from noting and remain done can work quarter quarters worth we technology in for to category fiscal over improvement Dental business and a for quarter directly of Dental spending our second related year-over-year had when growth our we for team X%. reductions of establish average have XXXX. operating X.X% year noted past performance partner it of temporary that driving the quarter, equipment quarterly were the for to eight previously, we business This in the is equipment second Patterson growth last by as the margin dental operating committed to and margins Again, down COVID-XX. number equipment the related in

the fiscal second compared ‘XX, of our Now sales our second sales for grew prior to internal XX.X% let’s the In compared increased move XX.X% second business for on to quarter to segment. last of the animal sales second the Internal of business our quarter internal animal ‘XX. year, year. and business increased production in in The the fiscal companion compared quarter Animal to Health Health XX.X% quarter Animal our

fiscal ‘XX compared fiscal the sales animal impact quarter this sales sales quarter to we second ‘XX. ‘XX second ‘XX over X quarter ‘XX. the on of to quarter fiscal fiscal in second back the second for years second of for And of performance, increased of business, will context period over Health quarter ago business before internal our the of the global XX.X% XX.X% Animal the the XX.X% ‘XX. the fiscal additional comparable for animal increased quarter increased look production fiscal our some of For Internal second companion pandemic. internal

through and global Our demonstrate impact the these Health the our pandemic, of strong execution Animal Health results high sales of the performance Animal has commitment level and entire team been of as they second in our prior in were operating Animal quarter, the Health XX customers. serve Health Animal margins Adjusted increase our of X.X% an fiscal year. the segment basis points from

continues and label Our to successfully private And sales focused Animal approach drive software. Health growth us reward companion for expense stronger mix delivered team value-added animal and products, who product, our our equipment vendor and on product sales with higher with to discipline our improved partners team also of production both customers.

that over of Moving capital the and X X $XX.X our million, months first increase to cash Please of litigation. million prior free payment Through included quarter free flow an shareholder the on of months flow free second flow the is $XX.X the ‘XX allocation. of cash note million the first fiscal to our $XX our ‘XX, cash for fiscal settle year.

have per shareholders. of paid first we ‘XX, quarter quarterly dividend Through cash our share months diluted ‘XX, of dividends. During fiscal a declared million in $XX.X out returned $XX.X the and fiscal million we second of to $X.XX the X

as return to shareholders. we to continues allocation Board cash our dividend capital component our view of as Our strategy important an our

fiscal range GAAP are me outlook $X.XX our to earnings comments our Today, conclude of on updating of diluted new our guidance $X.XX for share. per diluted we some to GAAP XXXX. per $X.XX prior guidance share a Let guidance range with $X.XX to from

to of the in diluted continued pleased our share we guidance respective adjusted prior XXXX $X.XX of We trends and fiscal XXXX, share. seeing are earnings range our for guidance end to an guidance to adjusted date earnings diluted range our and updating per of are halfway also $X.XX per our performance business to $X.XX markets. from the $X At with and we our momentum are fiscal point

year given quarter. year, the purposes, in to comparisons assume the more prior modeling that the fiscal weighted of can two will For our to fourth heavily the you XXXX be quarters remaining EPS

remain with our the pandemic. guidance adverse international developments add And for with me now are over conditions current that and the there also Let call market to material I back that some consistent American and market comments. no associated additional North conditions will assumes Mark turn

Thanks, Don.

wanted second potential. points As highlight half us end I and our give position and of beyond, key to year fiscal confidence we in Patterson’s each to several markets the our creation of look value that ahead about our strengthening long-term in

First, place to to ability and changes positive capitalize the fundamentals we through occur. right have with strategy market the market nimble they manage end in should on potential stay in dynamics

help Second, constantly of the set their we comprehensive achieve products, to be right services we have customers and as their aspire to technology goals our indispensable partner.

promise support. glad shareholders. wake allocation returning on focused of I our please Don cash up enhanced prepared over strategy Third, and and take That through now our your our we remarks. open remains to accelerate unrivaled and trusted create And strategic capital energized shareholders team that on our who expertise every line. attractive dividend to day have be Operator, deliver X,XXX passionate, dedicated help members and to focused questions. And will returns performance our the identifying will investments and concludes finally, for our

[Operator with Instructions] first Your Rich comes question Goldman Sachs. Nathan from

Your is open. line

I questions. morning. that the seeing currently the curious kind I to on kind trends that you what’s any product it just face as good comparisons. and But specific strength of Thanks there? driving accelerated maybe of tougher even And you know you’re basis. Mark, Hi, categories moderated kind companion X-year pointed think would maybe of you had animal starting for business, with the a highlight

Nathan, Yes, thanks.

doing a couple animal companion strong noted, of the of our of a we great see, think, really, And indicated, pleased And I as very as multiple team performance think you with continued We’re reasons. really business. quarters here, The is key to I we’ve growth. job.

And obviously, tailwinds more strong visit. full myself more going attention paying system, that higher the our pet veterinarian advantage seeing spend pets also often. to the market a in pets, we’re per like – more to First, parents are taking we’re of, more clinics

technology, So then there I and some through those team services, dynamics education customers trends and productive them a macro in think, really help the you periods, really place. practices I products, challenging animal manage help our with taking deal from pandemic, start are of market And our the great execution being our very with, you customers the to companion couple that on positive, in supporting manner. them with work going that think really with with have manage with their the of the really helping just

growth the think of has think the don’t in And this the We the But performance combination of we do continually. to we’re growth fuel I Like pleased positioned our moderate. said, certainly, well we been the obviously, market factors to levels of continue this performance will behind area. is definitely really our here with outpacing team rates we grow. is we fact and think, on growth point. those going some growth these at expect really strong that believe So two our the

ballpark? moving growth held, around equipment that if I Dental. about X-year XXX about some in maybe I there the highlighted you as And we right Is of in we about the that of Dental trends? imply XX%. of that revenues kind think side. the Thanks. should growth XQ jump that over is if for Don, think I could think to think XX% the segment. I on know Great. maybe X-year pieces How would

get to curious thoughts be cadence segment kind just in for would XQ. your I of on the So

that say normally Nathan, in guidance that – maybe relatively the haven’t way just is But that. of would give like don’t kind we we the you thinking about Obviously, ballpark. Yes. characterize probably I

Thank you. fair Okay, enough.

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

open. is line Your

Hi. you’re dealing the little congratulations and negatives. to the Good Clearly, into macro bit morning a quarter. strong want of operational drive and I on side. a uncertainties, with lot positives

you the forward in will that in variant, mean expected you’ll you expansion As year? you of much ability think with especially typical that flex does spending about pending – essentially flex think of uncertainty for see half what the the potential your this the cost, the to And margin Omicron back go quarter? into cadence how the of how of terms think fiscal that

say, Mark, in you. first of all, chime well. or and Don Michael, a I’d This say I’d Well, as two. comment is can thank make

labor. indicated, I particular, of cost front, the in pressure we the seeing some think as and on we’ve areas are transportation in

I think last now we’ve for that couple a quarters. the referenced of

of really, great job top around those we And our to line grow, we’re base continue getting cost as really pressures. team our doing is Our see a mitigating good leverage there. expense

certainly variant market In to early end it’s terms determine on the demand. Omicron, look, impact, too will of if think, any, new have what I

shutdown that anticipate we’re experienced don’t be the whole will demand type early to be think – see a last go to And we’re really is as pandemic, result this they certainly, note industry clear, from what an in also market will and changes broad closely. an we as reality forward. regarding certainly prepared – going pandemic no it we continue don’t standpoint. better one the future we to we for significant a that But end anticipate don’t in certainly these we industry I monitor Let’s at that position society to I’d truly year. and a any knows impact of point, much But the as hold – it

just the would the we I the cost outlined guidance pressures that thoughts and Yes. today. baked have into are really add that

I to If to terms that impact on point, think that based our happening. dynamics. anything pass, significant think were come don’t a we really Mark’s of to isn’t change but the variant, expect I would significant in the guidance

conversion into your need how starting whole that maybe cycle COVID, relative years have had see when any but broader that Got in you different do Now are to to going about coming overall, do guess historically how and cycle? customers conferences high-tech consultative to they taken we ongoing think Show that that into tied of approach a I approach new a equipment the out sales? you would changes forward? they Do they that sales the you the And to equipment as New and I buy? think it. in guess Dental of normal of the particular, with and almost factors surely back how about expect you slowly, and think And X up, business want dental terms York

the to now through important I back have think We think helping industry business. are is really the believe think And approach, really impact across is course a I this we that anticipating more momentum that ever. the frankly again, consultative than dental the that has proved we not point. has our and to I pandemic. pre-pandemic really that board, Well, team earlier, build that, that, proved Michael, our meaningful at of the Obviously, pandemic. are to think if the a customers, and approach had implemented service had we dental real generally I of our sales changes consultative pandemic, support that a affect could an seeing result the teams, with our in challenge impact And teams are to across as that there point industry the field that unprecedented field levels the facing and but

the continuing of again, that the think investing customers confidence the in and one in Well, the I that driving, a practices some a seeing prospects demand the in supply about our confidence practices. just of key to lot long-term show are for customers that talked industry. equipment in equipment on We we side. Our of confidence to the strong is core their little are due of and technology. the are are They challenges the bit growth their elements chain

back that, more really think ever. I than So, – important early the my comments to approach consultative is that

services, element that technology key momentum we the going I I support that our that’s think think set a and the both comprehensive And our products forward. and to really customers provides. of been have Patterson building appreciate success,

Thank you.

Thank you.

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

open. line Your is

morning guys. there? me Can you. out hear you Thank Good

Yes. Hi Jeff.

leadership. in guys. you on made you? Mark, a Hey How dental are changes more have Eric some strategic of taking is here role. So,

on you pretty recent think some been I calls. have clear

have I your from strategically, just ballpark on go, name third to how with are One, your verticals? now? us to I cash could importantly, are Just where think of focus think so potential understand just don’t but a in capacity expect a You a dynamics thinking there where more Could what put increasing in we maybe would that. are of like been, have flow then to right potential things would Two M&A. on kind you I about that? scale Is Again, you vertically conceptually kind current about you targets, you about Thanks. could your stool? manufacturing you sorry? perspective? the that leg thinking M&A integrate And

to Jeff, talk question thank Yes, second. can Don a in And the you. capacity here

mentioned the me cover accretive M&A. of over we made. our the changes to And the doing accelerate And opportunities it opportunities M&A. identify am profitability have team and pleased leadership really been our through Let been the focus some with recent topic Patterson since the number at maybe certainly, rebuild to growth here. to to continue on of acquisition Vet, we Prior has Miller and you I work Patterson. type past nine potential really that significant had to to had a of years of six muscle months done months broader any

rationale, service fit value looking our drive our greater as is we for customers, that to also the again, portfolio build proposition, presence within our expand hurdles Patterson. put strategic margin-accretive our to business. areas, strengthen close to financial and to you in to would the opportunity in only a work. culturally intent and really, potentially our opportunities be and really our core value that So, scale have build in so, mentioned, but here product the if really gaps the our we opportunities and sheet meet find good And intend balance do meet We

focus forward, So, us. key key to is types be this the will the and focus capacity team, looking our make very continues of executive about some be a But and we and have to we takes for process pursue. opportunities we some a news investments selective certainly that for of good the these time it’s

the of debt-to-EBITDA Jeff, comfortable would right between cash we of terms think quickly. in the be our Xx certainly for Xx, that be down ability dynamics, And and in we right flow ratio the to would with transaction, move north relatively think that I And temporarily. pay circumstances, with and Xx willing to given Yes. our capacity, I comfortable

we have quite bit So, a capacity. of

a terms just the in Mark be outlined. things of think that I shouldn’t constraint that

of kind of has margins, Yes. sitting And One, rehab This XX%. – about divest I back Today, OpEx do and quarter, enough. deal, I below rise continue of slip training, go Fair But if issues next the around than eight – that gross from think offset as control back that. maybe there some other margins about obviously attend the meetings, OpEx does between AHI do things margin very that? do gross think quarters there, these I lower? when mainly like post about you to we guess mix guess, here that? And we more and how does OpEx I you were trend you quarters the the strong Just do been more titrate when past kind and think to four titrating how kind up Thanks. to start are or of spend us interplay help to quarters? to over six XX%. maybe

really Well, a the Yes. think thing segment margin is gross mix the issue I – issue entirely.

the quarter-over-quarter, I give up I the quarter Animal segment slightly. gross was by Health don’t in and that, the margin but think our segment, business, did normally in dental gross I outlined, had mention we flat margin was then

experiencing the really segment So, just impact. we mix are

will of rates that obviously, good a we see But bit also the and will have us, as a we the – expect on we expense growth take animal be headwind think – to be side. that we continue I think we health opportunity that where to battle.

I the us. XX.X% sales number saw, in is you good of for think quarter, and a that our OpEx

have that expense I really online gross as margin kind back think of ways. up think, controls come But the think to certain impact. I keep in slightly margin we mitigating – things we expect the go that we overall, to

Got the color. appreciate it. Thanks I guys.

Thanks Jeff.

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

line is open. Your

on this the asking environment. the taking quarter dynamics of on a of to here. out pricing hotter topic I a wanted current start for the Thanks some Congrats in bit questions. guys. Hi Mark, there,

many manufacturers price pushed price all Some these the seen, take have as being turn increases we through of increases are year. at the but

are We a out from looking month ‘XX. just to

respect with manufacturing hearing partners higher your talk How health any dental experienced increases and health to And much animal or great are your So, going could you if dental planned than about what it price from price would be you increases? from normal just these forward. customers? pushback you have are animal

range, calendar levels some in inflation certainly, the you see average thanks. Really noted from seeing, seeing question. little we those in into than are segment as are X% of in in Yes. some far. more moderately Animal typically cost manufacturers, we and, the the Good Jason ‘XX. our Health Animal and bit in but A of increases we segment, levels so move spread segments, well. of of we business we increased so increases pronounced some higher Health the kind to some seeing are cost higher QX far wide Dental as as Certainly, both across X% cost manufacturer some and

I market is pricing customer to while out with identify slightly working the all passed approach from us are really to supply and both manufacturers these to get pricing our chain say, ways And methodology higher marketplace. we work that trends try same take and same of really mitigate methodology this of is the Our the at to manufacturers on try specific are manufacturers pricing in minimize the increases closely joint customer. to our built impact impact costs the ultimate year, the again help place. our of inflationary other to with ensure really cost to – increases time, the to the these level will

built market. So, to changes increases manufacturers I do watch made. our is the here closely, are that cost working on help passed is clearly daily continue the we get key to think And be teams with what certainly again these the to our something methodology really will we to pricing that sure make ensure understand

is we be then thinking margins should have factors we don’t we mind again, well? margin, bit commentary Thanks mix, guess any over But as we helpful. side, in gross company know I then gross I guess other we margins half I guidance. start or business gross these shift question, of a there considering gross margin was helpful the segments, the Mark. that lower aside here when have segment and on up from Don. about ‘XX should forward anything think back the for this quarters? That’s year higher on would Great. Jeff’s coming following the And fiscal

No, we I is in as back would of have have think significant I we expected. impact half. – would anything margins specific of or really year that you a I don’t kind one-time margin as that the here cadence the far for type way so this highlight the situation

thing drive is focus and The really of our that Yes. across only to businesses I both to would our add try the just continued improve mix.

particular, whether mix customer health products, space, those for to improve So, label software further penetrating our the revenue and and products. that’s of through would in example, private with in animal to higher-margin equipment, technology, elements helping really improving be our and selling some key our numbers some

as key focus well. that’s for So, us the

guys. Thanks much Alright. so

you. Thank

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

line Your is open.

your it within follow-up. talk to well? And that on have based or I ongoing companion There the got morning. Good does animal maybe seeing Patterson of Mark, occurred in then doesn’t will consolidation just Maybe I among for of of accounts? what that, is with mean the consolidation. you those positioning a out corporate DSOs. Are start has just dental pandemic as coming guys. accelerated talk rate Thanks

Jon, Yes. Sure. Okay. thanks.

and First in last has segment the of we several DSO for rapidly continue. years, all, dental are the certainly space, been growing the here seeing that

regional where right groups that partnering growth really working our that also can to on we the DSOs to jointly there the support we DSO and really forward. frankly, and are from over performance both the are really we we business that see vehicle have have we And significant last their and regional operation our for that as that. have team bring our our that’s sure are certainly as And pleased we team the investments to proposition making of seeing. out obviously, well. and capabilities and the we our or focused I important think mentioned an going I continued the at build DSO DSOs us be those going are customers, can to years DSO and And focus shared, made and with segment we national benefit the the level think several with help with those value Patterson

a and the think focus we But has from necessarily I So, definitely us expect DSOs continue. going your on, of not question. to the been seeing we to acceleration, that an growth and are

think the strong shifting our we the have built Animal segment to in we animal accounts Companion Companion in and over team the have dental, strategic I Like some segment. seeing growth out we particular Animal health there. are side in

that in space. are winning We

the up in maybe certainly that We – our fuel that’s know that showing past. more as some element an than well. to we we Companion we growth helping are have think the segment in And of that’s frequently

certainly portions and the continuing we with focused very dental grow of So, making right the to we important sure are and grow there in on customers. business companion, both and

bps little you I a it. quarter, your I thought it remainder gross helpful. Got financing, lot down going it. better of push be was year. because And margins going am the goals to you I sequentially. than year was mix, the Very Don, think last you bit. year-over-year, for XX mix dental to internal the don’t And on all on of get throughout of fiscal was gross down The up and XQ. A GMs helpful the said the But actually color bps margin it’s the balance XX

going last other sense, isolate call than if XX other be mix? and margins – just that you year-over-year Q-over-Q? from quarter, to there sequentially, bps we what Thanks. call makes any pressure that to occurred that out away if up, made getting points it mix, Were on it, happened, So, was decline gross to leaning thought

script, Well, as it is XX XX in points, basis down and mentioned points was basis mix. I the down – was of pure that just it

better in think forecast. than internal that health context, Dental areas. the performance animal than our we some that was in probably better expected, was lower I slightly

an that And so impact. had

hedged. rising as basis our the is fully goes that equipment But required however, mark of really interest into we points on the market. rates and are negative. basis XX margin The That the financing points other it’s a XX effect of to portfolio, to

saw there a below that impact zero our basis then was impact get EPS. on do But gross margin point impact. down that’s of is That we you offsetting And the cost so that line, offset line. XX the the below really in and

Yes.

Okay.

Thanks guys. I think offline. Fair lot. a I got will follow-up I enough,

Thanks Jon.

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

Your line is open.

towards wanted around think Hey a dental upon growth couple the little Can guys. fiscal why on comment, to fourth just I quarter. surge be that we year-end. be? would Don, a more times your would equipment bit the see with I might I optimism buying that follow-up of of expand think, a weighted you that would calendar the

Yes.

I EPS think on EPS that how about talking I the the – about the timing model expenses are that’s is elements talking – margin. just so and and about really was of impact. And and of of to other really of back our guidance I was of in context the half basis. an cadence more some the the sales we more about less really what some

are talk maybe And you. to other supply about helpful. challenged follow-up within just Thank That’s and about a been as categories might dental. equipment? delayed that, that chain you core improve? you talk you some think Great. Can stock-outs And Okay. that impacting any you issues have when causing any I seeing categories? said can equipment

Yes, thanks. Mark. John, This is

indicated core in times we are we extended category. equipment our prepared particular, the the seeing manufacturers, lead in in from remarks, As

think elements, industry strong very this think certainly factors an that, chain impacting is that widely really from supply a I that issue there are known. is our of but customers. And number is demand I

as are news have. that overall here this customers But our are the investing times affected So, indicated, But their we again, lead the in in our experiencing and is than particular, in pleased really in we we certainly are with normal equipment the category quarter. that results backlog longer good I practices.

we And over continue – We have then manufacturer know early the get and next to issue. really to quarter and mid we we them – next of our disruption to back issue and our certainly working a moderate the work normal, really is this orders, strong so to with with work mid let funnel, and partners probably year. are believe but to or next customers this a near-term constantly do minimize to the their we status anticipate

or else what you easy And in is the something consider Thanks. – Thanks. Can was longer going quick XX% market much about livestock Mark, better a last digits be than there? one, so is maybe, impressive. growth you really low-single the allowing to on there to comparison, would that’s that an Great. one talk do trend just I term

and really think again, team thanks. for Yes, line, overall. business in the across think some I our recovery a we trends the but think us, nice mean execution I I bottom I been formula for great production saw production, with and And focus in really animal of really, coupled success not business. in of the that’s just the a market

good through team, our since really the is is really driving they very those customers, so customers. again, is our been Again, tailwinds. of products here And protein in growth the support and that demand our to managing some started dairy team supporting market. And our for have with up our there again, think day And outpacing I and there coming production challenging now and pandemic this animal customers our some space every periods.

So, the great our that care job we the executing through team doing the really customers a half. taking QX we and did quarter, with but business animal have is our results our in first are a of and the customers bringing value and tougher really expect. in pleased really, of comp than And really first production

you. Thank Great.

further questions time. for at the Mr. I turn no to are remarks. Mark There Walchirk now will call closing this over

of your and thanks, happy look appreciate and Thanks Patterson. holiday time all a soon. all and with continued today again Wishing Well, and healthy great. to your in you everyone. Well, very families speaking much. you your very Really forward interest

participation. concludes your This call. today’s for you thank gentlemen, and conference Ladies

may now You disconnect.