Patterson Companies (PDCO) 18 Jun 242024 Q4 Earnings call transcript

Thank you for standing by, and welcome to the Patterson Companies Fourth Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to John Wright, Vice President of Investor Relations.

You may begin.

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

me Financial President Zurbay; Patterson today Executive Joining Don Officer, and and Kevin Officer, Chief Chief Barry. Patterson are

and After by will your management, to outlook a call our the we of questions. review results open

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

including contains about and that internal analysis comments the rates are upon the of circumstances serve, content live or update time-sensitive of of call The we this revise markets statements reflect this the to as growth the forward-looking based addition, the to XX, or date conference information and company's events broadcast, XXXX. shares, undertakes market accurate call. In of is obligation any date only after Patterson no June estimates.

tax results amortization Relations presentation press the found can an adjusted a Please effect Also, in related are for various tables slide fourth fiscal financial our to in section the along our impact GAAP release the quarter full items. website swap, these with interest that XXXX. this and reconciliation The deal for year be will morning's measures reported of our provided rate we any of adjust reference Investor in of and note pattersoncompanies.com. at conference call,

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

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

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

welcome, Full Call. I'd XXXX and few call, on Patterson's before Fiscal key the throughout and Year provide John, like progress on strategic Health everyone, financial Conference an our and we'll the to Dental On our year Quarter a objectives Fourth Thanks, of performance segments. considerable fiscal today's we've made takeaways. with But discussing the core to Animal start update

finished X%. we sales fiscal with XXXX of line, top growth the approximately internal On

For production strong both the fourth quarter was dental by performance and sales animal. consumables both in and full year, our growth highlighted

unable our quarter fourth which the Our claim utilize for being processing negatively vendor, insurance attack many Healthcare, to cybersecurity dental claims in practices by widely services reported their processing. was impacted on resulted Change

The category our to segment, for within our fee-based is Dental integration a financial solutions management. software impact claims Patterson as Change Healthcare of seen with the incorporated practice value-added of services management many

and adjusted charging the service, fourth in both $X.XX GAAP EPS a to for During in that impact suspended our the outage, quarter. resulting Patterson

Excluding have would underlying guidance EPS year end we of landed full at cybersecurity would high the last from the fourth last and our exceeded Healthcare's our provided EPS Change have performance attack, quarter. impact the year quarter range

full further businesses the our in making performance, against balanced $X.XX to cost discipline along Ultimately, and across fiscal line fourth ongoing reflecting of adjusted strategic the investments with the EPS top and we profitability. enhance delivered our capabilities our quarter Patterson year, $X.XX continued for is measures,

our repurchases, through balanced alignment Finally, our with in dividends priorities. and fiscal $XXX performance allocation approximately million return shareholders during capital to us XXXX share allowed to

interest rates the marked by encouraged persistent through macro evolving uncertainty. and performance are elevated dynamic We by inflation, environment our and

while objectives as value end strategic speaks Our delivering attractive we competitive the continued as the and markets our and of advance customers to position team to serve. well our shareholders and to resilient strength our ability

What better position for most future. past I'm proud Patterson of to we've many taken over the the year the are steps

our objectives: above optimization. first, to serve products, core upon our third, is made end and reminder, the fourth, in strategy revenue customers designed our margin end our and to build long-term current best growth achieve a markets; improve the progress second, efficiency enhance and the As to X growth evolve rates; channels we've market drive services performance;

our to on for actionable in compete among entered growth and growth emphasis those We an software, and to insights more expanding and on and profitability growing data in laser-focused opportunities response strategic objectives with integrated software vendors tightly effectively. value-added services, this year investment and to customers like demand fiscal and technology drive

investing these and objectives capabilities we Patterson, customers. software strategic and value in these adding For our to business deepening advances bring our services margin-enhancing proposition to the

and in Health Animal meaningful fiscal our yielded both Our across XXXX offerings and investments segments. progress value-added in software Dental our service

all-in-one introduced new financing, payment For Eaglesoft solutions a and to patient and recently we've insurance CarePay+, example, available Patterson existing new dental customers.

patient Patterson enabling practice patients for retention CarePay+ increased options to operations streamlined for alternative provides our and care, payment dental customers.

to during made feature Second we called Opinion practice Eaglesoft year quarter, a occurred the the during announced third an into AI pathology a provider agreement detection the software. Dental Pearl, when for Patterson's we investment solution integrate leading set management business, with Another

and to outcomes to practice continues help transform in diagnosed enhance solutions offer AI customers, will how dentists improve dental detect for Second X-rays Patterson performers. conditions to and commonly productivity exemplifying uses clinical Opinion

we a resource invested On year. the planning enterprise side, Health system market-leading throughout producers in for cattle Animal fiscal Turnkey, the

view our producer an is integral as our business Our tech-enabled. highly Turnkey for We customers. platform platform

by of Turnkey to majority launched tracking Turnkey better are Insights Patterson's automatic The that feed customers business in and decision-making. recently data actionable a feed Turnkey through operational and bridging tool view yards, Turnkey and a Insights beyond analysis managed and supports app. about customizable meaningfully platform leverage systems advances data enables cattle U.S. insights historical mobile their to platform. a the fact, financial cloud-based In dashboard

Weave, will integrate systems, portfolio with engagement seamlessly for at relationship experience elevate Animal reminders, workflows We to automated the practices. client platform capabilities with analytics to and and our tools scheduling through clinics. a customers' suite client marketing, a practice Health unlocking streamline veterinary management veterinary for payments We've leading of software our also powerful added veterinary our

suite solutions. investments solutions time. while these to in technology demonstrate XXXX our in that Patterson the focus software will on opportunity to Fiscal needs year commitment Patterson's value of investing long-term ongoing, of enhancing we over remains for investments delivering leading are evolving important notable of meet customers cutting-edge these confident arena. And appreciable These our of types growth and was a provide this our

XXXX. to fiscal ahead Looking

on Our growth. strategic will and core objectives investments on our businesses will our remain that focus in deliver long-term

and services provide to for a and addition and In map software will continue pursue. to value-added road and value-enhancing RSVP our our Dairy Tech M&A, of acquisitions ACT capabilities,

create XXXX. the of conditions Both today of the we strategy, our that expectations line success drive $X.XX human end growth to acquired confidence to enhancing we on integrating markets initiated on our in in reflects track focused continue to with our organization with continued And of focus profitability remain managing guidance current the these adjusted strategy. enhanced long expect $X.XX investing with record that over diluted and our the The committed per in share combined cost our outperform and fiscal businesses we term, of businesses range and a internal investments, to a continue to in earnings balancing course, discipline.

on I'll the our Now performance X in provide more quarter. business each during XXXX financial the details segments fourth of fiscal

cybersecurity expected in the fourth moderation in offset strong with about and declined quarter, to driven attack equipment services Dental. In by by Change impact value-added our X% Consumables start Healthcare Let's sales, the performance Dental, in the our unexpected internal business. the sales dental partially of

nearly for nearly fourth fiscal XXXX. quarter X% in and Our portfolio X.X% year-over-year Consumables delivered the growth

control Excluding X% fiscal growth infection impact was at even the products, stronger deflationary of certain of XXXX. our nearly

Control of the and of negligible portfolio, the ability quarter growth. are products. our but phenomenon certain to dental experiencing Our reflects year-over-year consumables be Patterson's drive fiscal and our of even the performance, relationships for of that spanning deflationary above-market customers we more after encompasses still some value our Infection resilience private products which product first and within expect offering our both the product year, the XXXX. Both our the fiscal impact of comprehensive impact entire branded to market contribute strength portfolio Within label so, with the to

to the equipment Turning decreased in approximately to tough of leading fourth moderation we Dental equipment a the the as lack cycle, combined in continue CAD/CAM innovation. in spending time and prior XX% core to lap quarter, in the challenging Internal Equipment. sales product comparisons economic for with categories year

the through training, equipment unique financing equipment Patterson long repairs. category in our for period and Patterson's ability maintenance recognized technology. proposition challenging value and This to rewarded dental and does installation, leading our not cycle life for dental support purchase The to market customers has change and from equipment entire

the by by FDA distributor and we In way solution anesthesia-free, fourth almost laser helping can strengthened becoming Solea the Laser. address for common exclusive Dental cleared dental quarter, in procedures with benefit North of pain-free. a every is our American tissue of patient, COX all relationship blood-free to Solea This the versatile only that is The indications. a the Convergent range

to to has driving dentists adoption technology patient dentists achieve help will leading our strengthen improve Importantly, effectiveness procedural better We proven outcomes, for of Patterson practices. and our their experience, arrangement growth Convergent believe improved track clinical widespread their and novel elevate this patient ability record through practices further drive of enables technologies. efficiency, a clinical exclusive with experiences expansion.

our declined due attack. the mentioned primarily compared internal Finally earlier, as I sales quarter the category Change fourth services XX% prior value-added Healthcare in to cybersecurity period, the to dental in

reward Now production business to the companion Animal managing fourth approximately customers and fiscal Health mix driven expansion both by for our and business. on our Internal to grew operating margin strong partners approach and commitment our segment animal Animal achieved driven to animal our value-added also our our The production sales disciplined customers. focus in the sales full and to in the segment. driving year, management performance let's Animal us in with and quarter move for Health and segment X%, both on Health recognize cost by execution,

performance omnichannel and tailored business validation and its continued fourth production species. strong of single sales the continued our comprehensive our Our digits as strength strong strategy as in fiscal animal across the high distribution momentum production in of internal grew of highly presence, offering We effectiveness XXXX. see animal quarter

Our team's to enabled value-enhancing these the outperforming continue business provide needs customer to market. animal new production solutions and ability broader winning and our tailored execute to has us strategies

continued pet by In business, Companion in margin line sales in fourth part low focus own encouraged by digits, our veterinary and single our in in the modestly positive profitable strategic trends top to moderation animal and of and decisions in driven the reduced clinic remain while our traffic on confident the the and in ways discipline underlying Animal, internal declined quarter growth proposition that fundamentals by companion supporting parenting value expansion. market business. long-term We more

in are expect low market and focused pet our the spending. continue forward, on the to companion we Going to we value animal single are proposition where with grow aligning digits, owners

value-added continued Across an double-digit category the to internal growth strength, the in services of the achieving quarter. Animal be sales Health segment, area fourth

As the fiscal in success Health market. believe XXXX, Animal continued is we our we look business dynamic to end positioned for

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

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

fiscal Internal fiscal fourth fourth for Consolidated decreased rate effects reported the of fiscal 'XX, sales for billion, versus currency and year period swap, an compared X.X% sales the are our for fourth year. $X.XX translation X quarter adjusted increase of were same which in ago. 'XX X.X% net impact the quarter of to last interest Patterson Companies an of the quarter the

Internal increased period are for same consolidated reported swap of which net of of the sales Patterson adjusted $X.X fiscal year year currency increase 'XX, billion, for ago. were the an 'XX, compared the rate fiscal sales X.X% fiscal impact versus For effects XXXX. Companies translation X X.X% to and full the an for of interest

compared basis Our prior fourth to of 'XX decrease gross quarter XX.X%, was the a points fiscal XXX year. margin

of the margin, We non-GAAP measure gross for related interest gross adjusted financial portfolio to and that also which metric financial margin is rate the provide impact accounting associated of swap financing equipment adjusts hedging a the instrument. the mark-to-market our

gross company accounting the The segment. not affects impact our margin, the but business adjustment our of margin mark-to-market total within gross

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

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

their Patterson's and insurance of they relationship with many cybersecurity Healthcare our to dental as submit impacted unable were attack Change significantly customers claims.

During to bill valuable were Healthcare, we this profit lost service our Patterson. unable customers the Change resulting to disruption and at in dental revenue for

Our diligently to software claims. be our allow to software connect able customers to and process solutions to team their worked quickly to our alternative platforms insurance

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

XX.X% expenses compared year XX as unfavorable percentage basis 'XX. of fiscal were to full For sales operating a fiscal the to year adjusted prior net points the and XXXX, of by

fourth was XX the consolidated fourth to our operating a In quarter decrease of X.X%, the points year. basis fiscal 'XX, compared quarter of margin last of

the consolidated to compared points adjusted the margin year. prior year fiscal XX X.X%, our 'XX, a of For decrease was basis operating full fiscal of

to 'XX for tax the basis XXX fourth decrease compared a quarter was adjusted of of XX.X%, prior fiscal year. Our points rate the

the For full basis of points increase of adjusted 'XX, tax an rate fiscal the was year to XX year compared our 'XX. fiscal XX.X%, full

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

the The to Change in to the Healthcare quarter fourth Companies, due fiscal impacted Patterson attributable attack, year-over-year is fourth net in Inc. decrease of as equipment per net reported adjusted income the primarily diluted by as of sales reported and fiscal 'XX adjusted XXXX both cybersecurity share. quarter income $X.XX lower negatively which and well

amortization, share net or For the $XXX.X $XXX.X Patterson in diluted full share in XXXX. $X.XX per diluted fiscal 'XX, to compared net year income fiscal attributable attributable reported of to year. Patterson fiscal fiscal was million or Companies, $X.XX $XXX.X Companies, per or Inc. share million to diluted 'XX, or Adjusted million million $X.XX income $X.XX deal share which Inc. to $XXX.X compared per excludes totaled prior per in diluted the

year sales ago. Now let's quarter business. fourth fiscal fiscal business increased the X.X% of consumables fourth Dental steadily our X impact deflationary we year from of In 'XX, ago segments past 'XX. the the nearly will in infection and turn with compared the to for deflation product our control to internal the has fiscal to increased control quarter compared non-infection our moderated of increased minimal Dental This and year, quarter fiscal in over impact period. starting year-over-year dental an business fourth Internal quarter next believe sales has Internal X.X% of sales that of year. 'XX the fiscal fourth normalized to products compared effect in X.X% the have negative

market. the our and X.X% types across consumables dental to sales for in year prior indispensable efforts fiscal X.X% growth dental non-infectious solid to full praxis of ] 'XX be of to the our is a products year models to team consumables execution of increased control the their of by fiscal 'XX. the year. above-market testament [ all in of to increased customers sales sales The partners passionate by 'XX, sales compared compared internal strong For Internal fiscal

fiscal discussed fiscal In strong of in growth to the that all percentages fourth year-over-year compared quarter fourth due sales double-digit Sales of and decreased a declined equipment to comparisons factors the the to fourth 'XX, the XX.X% of in the number the internal 'XX. fiscal of of dental 'XX of including equipment quarter we've quarters fourth categories previously, quarter 'XX.

dental Internal services Healthcare. over of negative impact prior declined the year 'XX of fourth 'XX, full by to the Internal of primarily the period, due attack cybersecurity the over equipment X.X% fiscal fiscal year quarter sales XX% 'XX. on value-added of the in of sales For fiscal decreased Change

entire services we valuable to help suite also offerings indispensable the practice of partner mix represent our Value-added favorable customers to provide P&L. to and us are an their these offerings our make and

sales Dental, internal year the value-added basis over fiscal full year decline XXX a the 'XX, to in fourth 'XX. services margin fiscal declined of in point operating the fiscal quarter, X.X% Adjusted prior XX% For of and period. compared

For year and business by of attack fiscal operating point X% fiscal basis and in adjusted fourth Dental The margin 'XX quarter the operating decrease on over was prior margins our 'XX, the year. were XXX impacted cybersecurity full Healthcare. adjusted Change Dental fiscal a negatively the

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

the 'XX, Health Animal were up X.X% our For fiscal to fiscal year year compared internal of for sales full business 'XX.

X for sales the fourth animal production fiscal compared quarter to increased business Internal same of ago. 'XX our X.X% year the period in

For to business animal in increased our compared internal the production of fiscal 'XX, X.X% year fiscal sales 'XX. full

the above-market and of team, types the serve that our growth strong in that deliver the our This channels focus fiscal relationships. services deep we dedication for value-added year quarter customer across drive various and to entire ability the fourth customers and and of multiple productive reflects

fourth companion for sales 'XX to X.X% year. prior compared animal quarter in of the business fiscal the declined our Internal

business 'XX. animal to companion For the X.X% sales fiscal full 'XX, internal fiscal decreased year in our of compared

we is work to relationships we with with moderated degree high were fiscal prior animal value an of in reward to in related margins quarter more us and While increase intentionally rates strategic the XX nurture to market our the recently, and operating have in provide partners in our how growth our X.X%, Animal performance to customers. Adjusted companion a segment year. of choose channel from veterinarian fourth Health points basis

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

with partners to growing continues market. the driving initiatives, discipline, expense strong the team with their for label profitability in Health our strategic performance of maximizing solid manufacturing Animal and including Our margin-enhancing improved operational us exercising rebate efficiencies, business private execution performance their to reward deliver

cash cover me allocation. free and flow let Now capital

declined our compared we made the same reflected 'XX During fiscal in fiscal distribution and 'XX, to operational an and due period improve in investments free enhance the cash flow our and our to our services. million $X.X level software by capital year to spending, X of performance ago, value-added increased capabilities

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

dividends We returning and 'XX, through of of of $XX.X to $XX.X $XXX.X shares for quarter also fourth fiscal shareholders returned to fourth in through dividends million million the the repurchases. we share a fiscal repurchases year And the 'XX. spent total a of entire to share during of million repurchase 'XX, total and shareholders fiscal quarter

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

purposes, let fiscal to think 'XX. our items you for guidance highlight as factor me modeling few about a in For additional

current performance. conditions margin Health primarily and low roughly sales a assumes Dental operating macroeconomic and range guidance our Animal growth, in markets Our the reflecting single-digit flat

the the to negative The as impact attack year customers margin and Healthcare performance the of both inability near our their transition on processing on claims have due for full claims to will process as continued some Change impact solutions. alternative term sales to modest for cybersecurity well a

QX until impact a the and fiscal in year-over-year the positive expect 'XX. greatest comparison of be in We QX lessen to

and investments Our operating our continued offset improved reflect franchise, our efficiencies. additional mix operating impact initiatives in margin commercial ongoing expectations margin the to by of also drive software

up assuming compared slightly are that 'XX. fiscal will We to interest be expenses

in share our in count tax 'XX of be Our the was fiscal will to and fiscal 'XX. XX%, range our than rate average XX% count share in lower will average be

our year-over-year adjusted by Our per in provided growth dividend. of to earnings approximately $X.XX range enhanced mid-point, share implies X% diluted the guidance is which $X.XX yield by

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

Thanks, Kevin.

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

fiscal value position, our us proven the As executing committed on growth Patterson's end disciplined profitability. XXXX, long-term fundamentals confidence ability enhanced allocation capital combined and for our driving with remain and our we deliver strategy enter gives we strong to in to of our markets, shareholders. focused creation

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

first question from from of [Operator Instructions] the line Caliendo Kevin Your UBS. comes

quarter. the on Congrats

number up. Just wanted about, consumables put to first, talk the you strong

it said consumables what maybe growing maybe looks able and the you've was of Can terms And you quarter? in share been You How take about taking visits? share. faster It is to talk market than actually how the why trended? in like doing clearly that's market and you market. you're think

Don. Yes. Kevin, question. Thanks, good it's morning. Good and

this row, so exceeded that way and the situation we're like we the in that a count market been that steady, think quarters terms has we've would is been by helpful. my at But of the share. market X view I growth that's the is traffic feel consumable I in substantially least, taking

a look year. the year X% get And growth for if really you ex-PP, you'd at the

So sustained this program. of is a kind

at I here. think involved approach at look a how want to We've a this, number we had there's look when we very our to business. strategic of consumables factors

And I starting really take so that the employed, strategies think, are to we've hold.

our proposition customers. customer piece value of very We've the our focused always this experience. at been You on look to

how significant we think the force market off. well I we've that very And then so service that investments sales And segment in DSOs pay starting execution. as some are of made to in

we're very together, been put performance you when with. that sustained those So happy all just really, there's

your follow-up. continues? single-digit around quick than Dental? of growth your that ask this assumption we that consumables about but predictable your pretty is Health for relatively to a sort more can growth, And would in the assume 'XX. Animal equipment? I what When seen revenue Should low rate, usually hear of be Dental. we've If assuming I'm helpful. a we That's think in that that on for underlie mid-single-digit you love do I fiscal what expectations might growth drag expect your Does sort

question. little Well, have that give of me Good color a piece. Yes. let maybe Kevin just on you bit

Yes.

I Kevin. think agree you, I with

think we be for being I consumables what next is equipment dental mix we look to our as we forward at the of side. year, categories. And I we're market, of would cautious as those going out around expect watch expect the give that just dental somewhat [indiscernible] looking

We be And but the teams, of customers, overall feel our still to the about gains consumables, there. with story, just cautious continues offices, we're traffic we're to our proposition. more value a good in market sustainable. given to do feel as we like year executing early our But a equipment on made especially here, continue be get we'll it the dental really as Don told consumable dynamic, to than share more bit part fair we've the those in big similar well the maintains

just support the Health -- growth? Animal and should net-net, So so both single-digit Dental low

Animal Health We more Yes. speaking Dental see I year Yes. agree. growth well. Animal was But you dynamics Yes, I in yes. there. specifically, for as next Health, the

Don. is This

down, The to business equipment markets dollars where sales consumables. Animal been over feel really been dental translate to they particularly been our soft. profitability last good, we if similar somewhat the market good kind has you and of have line sales the And about is quarters. those story break and Health we've bottom the as our the few of sustainability think I the

that looking And feel to like we when for to rebound and does, in take advantage that an that. think of excellent I so we're it position we're

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

still just of Could mean, up you Animal, higher-margin manufacturer When I Health. of the I that And the growing. drove the have was revenue, were what Maybe sounded vet clinic look you comments Companion relationships. about areas of at some you think, things maybe like just you about on talk following kind performance? it Can we may just quarter. Animal as down those it's like in talk why kind on maybe made business? the on changed focus

you single-digit like maybe I what from that low And companies longer in softer space. you're growth than little then, hearing companion. that's we're Don, I bit used term, a kind said think for to of this expecting feel

So could longer-term maybe you just outlook? that talk about

Yes. Nathan, I what turn coming the Don in standpoint, start over our side. year modeling out moderation it's -- I'll a business [indiscernible] from to animal we after a past it and we're COVID. companion market of the for kind Kevin. on seeing think this Yes, the with view, highest expected of

through fiscal on that's little in to top at some them away we weren't see business strategic We parts traffic earlier, when What weigh and manufacturers. and looked more and do new that a mix we customers to of decisions products the to And still are the we'll become of to our But early said contribution we part our team continue of the to Don this they these now. line an has business, certain that here model steady of the really we've healthy manage are things 'XX. we shift margin do delivering some there need, overall standpoint, made to the for alluded the from decision is made year. those see customers going that around bit from new like business

Yes.

and this, record side, think the companion the operating me, sides bit profit we the lost this things important this side for be operating I way a one the reported business, both of the but that actually in all-time an the numbers a I think Animal profit of might of report quarter, quarter. record and production Health animal kind

the So line sales what's exactly aside, is bottom want. we to think translating I what

the just maybe Okay. low for companion? for longer-term on growth single-digit outlook And

pet alluding that's the are more still of that how owners that's Yes, we fundamentals outlook, wouldn't say that spend kind see fundamentals the year think in health. term of I to terms beyond terms pets, of fiscal market, and the on our towards trends still guide I Nathan. pet service in -- continuing. Those that's of innovation absolutely in category coming their long

horizon, think we that longer-term the still we'd to So expect accretive to over be our growth portfolio.

Okay.

I misunderstood. Sorry,

low 'XX. to refer more the single So digit, fiscal

Yes. correct. Yes,

Okay.

think, quick is? And impact guess, disruption, but Because the experienced back relative about change and terms The maybe Sorry. you fiscal And impact to into just I'd kind real-time can continue? of a then in curious first seeing magnitude I you kind I continuing lingering that impact any sense the running, was what from the largely what the talk thought I of Kevin, what the fourth just I quarter. then you expect quarter? to up more of guess, in change you're be of that of follow-up. kind

Yes.

look of it in terms $X.XX at about impact, here we in we QX. quantified the As

And a comp. it will will slightly here I less a a think compared to QX QX have and QX in be comparative of little positive then year. and QX basis then bit on last that than than that, QX, less

for up with near dynamic still we're what is customers dealing here term claim to is some is in diligently our new really working onto the provider the team services. back And the get

of bit customers that So of terms are software. we number claims of gap through and have running a in our the

in term, bit some we be our franchise that's had what really we Eaglesoft here lap franchise to the gap. with see and Change environment there's to Healthcare from QX to until in we're that year. of Longer that's and a we new issue the So a this going to expect near-term going compared QX into of do the going leakage QX what be is

had going service and provided it back customers, charge -- of wasn't providing being we there really, was in but And our fiscal just service QX lower months. 'XX, with just The now was we couple the for we're a a issue that here, to of again, the volume.

Yes. add just And Change the from be -- clear, to moved move Healthcare. from we I'll Change

have So new we a now provider.

this in back of way we mentioned So Change a terms you service. to move different we had this, for approach the up. is But provider

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

some quarter And comp. through you we dental a I to pull-forward bit the outperformance fourth equipment year, quarter performance sort then very was the the of know had of sort Wondering, in help then first that of in into detail? a I little the a maybe nicely despite in little the to into think bit fourth wanted tough equipment in quarter last quarter? more first in dig base and the you some the about and make came some sure strength like us, in quarter can how understand of the So more areas equipment

Yes.

unit to quarter, lower some you it So lower fairly against was I'd subcategories, think coming here year technology, came a Elizabeth, core expect It is were to comp, going the across up sales ago. And we and say, a that volumes. our consistently in which I'd story. say fourth really tough through, a see we mentioned and units the I compared

the fiscal given expected X somewhat QX 'XX performance than we as Again of quarters in really strong years compared to before.

necessarily -- category So out broad. stuck wasn't that that so that's there was X fairly

fairly cautious I earlier, I said think we're new as outlook year, being into here. the in our we fiscal like here look

equipment term, a more broadly, over I you near like that last the need year, that our upgrades we QX alluded this where to, we be customers strong a a here. we'll opportunities a in to fairly this to comping have we're projecting see we're still But think in year it new there's F expecting core macroeconomic year modest at but necessarily for quarter good service guide. equipment us 'XX be fairly had not catalyst for that our In at in point,

-- other is I'd of this the there's bit thing year. think being cycle much -- into we're a the sight innovation mean as is cautious we're an I add reason not I other

we're the here. overall, So innovation down which bit little the Dental, But to we're innovation topic. probably conversion excited mentioned very a as partnership our innovation on about I is with side.

you year, to in That know makes sure about what in over not be, growth? you of quarter, consumable make quarter I XQ, the Because help out in the just terms you on And that underlying as negative it I of the PPE sort -- total maybe missing sense. that I I that called just saying in know wanted size price. last too, that think strong that mindful we close about of up, the relatively PPE a were so be X% impact side, to us from we're fourth about like sort seems follow first -- Can of Dental the again, impact year-over-year versus that? X%-or-so to well.

Yes.

say, have been saw of past goods of way basket late same year since in the that a price the that [ basket. tracking of zone we've price that And fiscal stabilize, got I'd our fiscal of then. we've that where deflation. aggregate So at the And that look been kind this it, QX it's kind impacted of by really 'XX in been ] relative sort we of average we really,

we And stabilized. the that so pricing say has

saw 'XX, fiscal X looking much somewhat to it's drop versus and minor and the of ago, pricing more was really but fiscal going fiscal fiscal 'XX be compared fiscal as as a -- of QX basket a where comp our So that and to a it have drop for wasn't 'XX, year still a then us, hopefully, of 'XX beyond. we we'll that at to in moderating negligible dramatic

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

XQ peak As OpEx it 'XX expenses ongoing the software, think you how we is spending quarter XQ the about and what's that facilities those going forward to coming those in the about then in how higher was online in XXXX fiscal maybe to guide? into should talked and embedded around move last of assume are areas? And or investments distribution fair

implementation really you -- the did Yes. investment the from in has an to, and tail those business. for like alluded But standpoint, the ERP are drivers. there expenses some are there was part, capabilities. done. business that an most Canadian we I'd on we new recently X brought facilities big on expenses say X Those costs start-up Dental is those now our One

investments And This software Dental so an making in structure is the franchise, bit that's year. when in the commercial a investment our have going business. in into of next we're our is sustaining But that particularly little a the made. OpEx we tailwind that we've

in from increased have capital product development our And that those also is well [indiscernible] customers. in to We've those OpEx. our over our somewhat up work Infuse really those around we've seen our And price shows there. and continue dental those And will the also cycle in investments, 'XX. as expenditures, commercialize systems, the really some into on ortho system but feedback products as progress continue this fiscal management improve Eaglesoft our past investments It enhancing to we good our really We've here our still years. gotten good go-to-market capabilities

The one revenue or $X.XX I follow-up here. then should and revenue, the you lost a revenue that at headwind charging, that expect stopped impacted of from from be Kevin, the sense Change. trying Just through? quick said that some that was you point know is there revenue get we not completely revenue? or lost whether just it's if flows that could a completely to or that tailwind

lost. lost. Unfortunately, that's other had just to to work that just find time their get in around That's Folks some processed. frame claims

just that's revenue lost standpoint. So from our

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

things you've together can Don, either sure I'm or comments a Kevin it one, to make I pull of made if just understanding correctly. maybe few just kind guess, I and

to it Dental, stability And few like, digits Dental business Health like saying the rate you're sounds within a Animal growth you've grow in sounds mid-single-digit single that it the that low the both and XXXX. business expect on mentioned you then maybe So times Don, would consumables.

the this as months? of be down kind most no I year, Is in the model, would market seen know that to line? low- And just equipment mid-single guide but digits there to kind your in internal of was any kind down to that equipment mid-single revenue, getting worse, is you XX change, fair of better, change trend of you've the digits So and if for into assume equipment kind it of that don't assumptions? put low- we to past

you Yes. we're on to a No, that's the we're have cautious at I mean, right. at it fairly in that trying looking and on that -- market the just kind how And performance recovery. I market, our think exactly look of take outlook we way.

road. I be the X some point X And getting down right. All the at here fourth years, had you've Don, Dental Fair last leaders presumably, the enough. at a over think here business we'll then,

more to seeing so guess little a And kind just change I of more of some a businesses. little than these we're or up used leading turnover

on So you what's down the How side Just for of that the viewing wondering stability kind in stability going there? you of forward? issue thoughts looking underlying are leader of or hopeful are kind position of leadership. the a a long-term been just new there? What any

question, Yes. Jeff. Well -- appreciate and the I

I our always obviously, key individual -- for always there's role would always look each when are there's a company. I terms these tough think this this, But multiple involved in I factors say, of situation. at and is

here I'd let one As today, we have know great of is we team. the sit just things everybody dental a

confidence in here. So we team have that's full the

lot our I of plans, move business. we of we terms of lot terms think good in a we strategies dental leader a of have how and in a forward, have

aligned future. about we where necessarily on when are the that get think about now to where right that road Not somebody at can a execute we want we looking at be there. to thinking we're are the be or look -- about, can And what in and and is leader look I aligned and map

be important And most so thing. the that's going to

Each that, own It's is Patterson. beyond strong. an the there's I at believe has I say And unique culture think I'd in I that their an businesses advantage culture. been overarching been, think, us. strongly for our of culture

going sure I also maintain really leader a so and honor that that to that And culture competitive keep want have make that, advantage we that's to there.

say on focused So where are go things that we the now. I'd terms those of I'm in

Wright question Erin comes Stanley. from the Morgan of next line from Your

any side deployment. thinking now just see be where capital focus there and you still leaning your about there? M&A in pipeline the deployment change and seems part broadly, opportunities back on how Has or you're Has out of changed On Just at philosophy the it M&A just you question, go the been to just organic all? in of seems that on priorities? of more just terms the more capital any

But really No. look been. that changed. do. where of maintaining we I don't the no think we to trying kind think at has that And in philosophy forward, change move as like what philosophy, I accelerating maybe we're has philosophy to would

is I internally. just think this gets type lost other the I all investment making think we're thing the that in conversation of

kind the at external we're as of change. investment look at investment, good investment. best no and internally doing of we but we look I things of well we what's a use so So and because have lot -- look capital as at internal the

Okay. other categories this to And new then you well $X earlier And category, opportunity? like as the on the a some of about billion Can the these across that a bit and little dermatology, some Especially a just down and Animal areas of bit areas are kind little spoke pipe. coming Health you adding but speak lines. side. product

sort animal kind of can manufacturer your innovative into some and how that vendor health year. landscape especially of and I mean that second of that some go especially the the as of your environment? half how does proposition, competitive, more value the in you Like gets get better partners as we leverage more economic calendar from

team relationships manufacturer -- veterinarians get go with know mean competition well innovation in and you we're that to And our to good like out influence Obviously, hospitals. is products. mean of think us in because Erin, and there's seeded the customer And right out this I'll our and to wheelhouse right is that's we when I the our -- to is Kevin our equipped hospitals the our here. partner innovation. for start. alluded the I for us, a proposition. the it's good too, ability with we value of yes, strength sales

yes, we're coming. innovation that's excited so And the about

And working manufacturers. with George and his those team closely are

But it's at dermatology, in year. manufacturers we're something here for the on. conversation alluded with the watching You constant that's we're something

well equipped And we're this. for

I we of out advantage. that going is play something this kind an for to is So as thing think us think

from Michael Your question Cherny Leerink Partners. line next from of comes the

year. huge related you're guess innovation everything else just to this have you the follow-up no mentioned expecting targeting dynamics Don, I equipment. I of one dental

how breakdown on think dynamics the market what's As of the embedded in about see you you growth? guidance, do

obviously, both been, high-tech different in underlying of There's areas basic. over concerns and growth a lot of various

where core general growth skew the have. comp growth the at year conversations the does of talked that's the Whether You the course year? the through though have start through it What mean the rest you and backlog year. for of about equipment market should challenging of over of other the visibility into the

when don't if peg start look to has comments. these try we Kevin the I'll and all factors at Maybe any we market. I know But

pipeline you it's of what's As difficult. visibility have all orders, We in to do terms a variable so extent in that's obviously. know, the to some on market some tail

terms in we've kind been. But -- comment of innovation of where innovation, really the more was that's

us well, where clearly. But We have, get we back the my something But year, there and history again, here as is we bit. still that's that that's we'll as see visibility the of towards start takes hampering some year. the point the half as that's just recently, that the been maybe market a

Yes.

of to, at at force year, And add replacement business, promotions. necessarily there, right going those good even our sure making got when do get their financing and well-attuned is we times equipment tailwind cycle things we're on to that's team it's offers like know innovation, to there return really certain make we've at the the out time practices we've without that sure and kind think help demand equipment. good there's investments got I think sure maybe that drive sales is what the from look of make that's I'd that, the to a that I to when on a invest how also just we our to a

ask And question. more quick if just really I can modeling one

think impact well change the the the beyond about hit we balance 'XX? sheet quarter into should the any about change both the terms in income of as flow-through, on as in dynamics talked statement that on You

just it, balance than No earnings through other impact Michael. sheet the No. from flow

Stifel. question Jonathan final from your from Jonathan question. comes It Block final will sorry, the not of be I'm line Stifel. from is the And from Block

fiscal Great. I'll sorry if be flat OEMs little I Okay. but clean the missed bit. this, to year-over-year. with Kevin, expected up 'XX a

investments. it, can expansion then that due to quick sort some to reflecting the ongoing and due then follow-up. Change the year-over-year out deleverage, the trying just little Is year, OpEx Just part that, Maybe the talk call maybe a you margin more bit. in I'll that of to gross of ask back to tease some But maybe a if comp.

No.

of it seasonality get I We'd we falls some some on, typically, as with think you leverage. goes well that mix -- as business op generally right. expect year our got see that just the as margins improve from we

that So then going this will because a It's comp QX, have a we're year quarter of to -- OM lowest us favorable in usually little that bit. a we that dynamic. have there going exacerbated dynamic QX it helps have and change in bit be QX -- from we'll to our

We're margin make John, investment expansion. to the I would we add. balancing, with want

big sales sales little above So And going bit that improve the are as a potentially. there. a extent point to and that's leveraging expectations, to their there's of be in obviously, our

But to maybe versus of April-May? Understood. yours think. the Anything then Hopefully, items, would you under to late? Don, trends anything of I you color been trends less pressure, we helpful. stocks. got give Any on just some talk is more specific a has discretionary mean, today, can any And around traffic to be Dental color you would going lot late? can of all be under pressure patient

we say at I look the Dental, a broken here. Yes. think in sounds again, bit like steady. has But market consumables traffic that I'd the it record a been

performance lost line. Health And in is both excellent the there. on not again, think then on story our but ] not this, here there's in Animal continued our think [ a is segments the pretty I I bottom lot what's to of

lot we're our here story a so of lot there's on. has positives that focused -- And a

will, business I point be it -- think, for We're to that. perfectly equipment and better. take the going to is that of to well looking we're what again, get at positioned advantage

software, things investments services then of in talked making about some technology, line item. today, value-added the we're driving that And we

the it But if into the market just you the get good. really so gets the standpoint that businesses, look equipment down improving. and that from P&L it, of And to rest

gets that I that's maybe of the kind in so all think lost think And on I our a bit view go-forward equipment. little focus

of We question Sandler. from Piper that Bednar question, line have Jason comes and time from final for one the

Dental square direction to the posting in are your really, think, Consumables fine, been you're direction solid. good, segments. consumables opposite has Animal thinking to consumables what has and margin surprisingly would operating going relative strong. in margins to been but growth margins is wrong to X for trying wanted the conventional suggest when I'm what I pretty of start. I have been growth Don,

the it'd profitability. so margins for you've why performance translating could franchise? guess investments be is, referenced we that you credit I question So software sense helpful better the dental some of that to consumables margins if that Maybe a core get of for give and isn't you quantify can underlying better

start and Don on. average standpoint, can from in a I portfolio gross you're the about margin I I business. that's think consumables -- margin think Dental accretive I that to add standpoint a correct slightly mean, from our can

part very that year what in because X you're was seeing business our but near-term is think Change I the in up was here you're Healthcare, bringing QX. keep QX, that a disrupted in profitable of

here in margin for us drag gross significant quarter. a was that the So

at Dental, we look As margins for bottom the to going right. line, then you're

We investments year-over-year, have software drag. a that's the

helped have a a was that year related that ago a QX, QX. to here we're comping over Dental, in also gain worth We did onetime sale in that bit in asset an

specific couple a dynamics of So here. there's

that That do will than a so was margin as it I I we're definitely some That's think in with to that continue we consumables to on model. market on and expect segment we One, continue to we to continues, we'll forward? the year-over-year margins the be And flow still start that standpoint, less from comping around business software a see year. early would question for your headwind past going be over do but here part Dental how slight investments. broader our if strength, expansion. see the of the this the through year, trend of share the

Kevin. a Very right. And All maybe Okay. helpful. just then question, clarifying

said you down the for be year-over-year. share assumptions to think count I

repurchase think heard you probably the fiscal XX think I activity with in active additional clarify buying your in don't Can about been you've that goes comment. whether I that stock past in that saying 'XX? share guidance I back assumes months. how your

We're and the 'XX, us had not opportunity. the stay But maybe balanced opportunities kind assuming giving flexibility repurchases return that, some to in level execute right said, to along, share we maintain assume our on more, more we but M&A just do little come as that level if we fiscal a anti-dilutive some to of a like Yes. same here that. flexibility of the see Don we of kind

Don, concludes session. you. That question-and-answer our to back over

Companies, right. all time next to and interest All we'll you you Patterson for today quarter. and Thank in talk your

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

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