Patterson Companies (PDCO) 5 Dec 242025 Q2 Earnings call transcript

Thank you for standing by, and welcome to the Patterson Companies Second Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions]. 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 Conference and Fiscal Patterson everyone, Second XXXX Call. morning, you in for Companies Good

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

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

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

inventory of gain any investment quarter we sale presentation and interest call, slide fiscal with amortization, related will at an section GAAP XXXX. prepayment are of reference and provided pattersoncompanies.com. press expenses in items. and adjusted the can integration our of along tax financial release a adjust conference in business measures the our our Also, for website this impact The in for Please swap found a be of restructuring Investor second effects on the and morning's write-off Relations deal reconciliation these note reported various the tables to rate results of that

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

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

everyone, to Quarter Thanks, XXXX Patterson's Call. Conference welcome, John, and Second Fiscal

successfully we this to, strategic maximize include, be our combination are not a Such want merger, will We such acknowledge announced any Patterson quarter, or that cannot evaluating we will transaction, morning, press Before result I are alternatives than to other potential release alternatives discuss at to but may that if assure our value. sale, pursued, in strategic a business that or transaction limited transactions. evaluation completed. shareholder

understand, any determined can does you or disclose further and intend not that to developments disclosure appropriate. Patterson it is questions As is unless until further answer

end challenging fiscal our a results. delivered environment. Patterson's market results Patterson focus quarter Now let's quarter turn mixed to fixed second second within

year-over-year by business animal Our our sales value-added fiscal segment, in driven on categories. strong and internal X% second services quarter in production increased including a approximately increased sales performance Animal Health our basis,

during continued a Healthcare Change partially an This quarter. attack fourth fiscal the slowdown equipment cybersecurity growth was offset ongoing Patterson's and from by occurred impact dental spending XXXX in that

our through on continue quarter strategic ability took manage to our call, last we preserve Patterson making actions management previewed macroeconomic quarter the we during to investments growth. to environment, to cost long-term position for As dedicated the sustainable challenging

people nearly our corporate a activities. with while headcount, quarter, we customer-facing all the focus During team and reducing protecting rightsized our on

organization approximately $XX We million. savings cost our annual generate expect will of of this realignment

drainage line in across discipline cost strategic leader Infusion acquisition investments strategy. We market our supply and agreements products store a and with for and throughout distributor Colorado, While maintain of we the presence in design regional the business. a animal X critical serving in continue Nebraska, Vet Concepts, our to organization, U.K.; care customers with Wyoming retail health infusion, Supply, Montana. long-term and the separate a announced made we Mountain

capabilities These in production Patterson's health high-quality position strengthen and services markets, the respectively, and customers. expand with products, our transactions companion and animal portfolio animal channel for

a to continue services software important offerings, growth in opportunity. also We of very value-added our and long-term area invest

we revenue adjusted invested Ultimately, enhanced improved dental operate fiscal XXXX, Fuse, EPS diagnosis within quarter, and delivered In delivering second and the capabilities the we of care for automated market. and more and b Eaglesoft practices $X.XX. Dolphin, features constrained cycle in labor in management while presentation. quarter second efficiently workflows, new a patient of

outlook. particular, expected persistent pressures our the adjusted industry. XXXX to reflect fiscal markets We our of dental in guidance Turning our revised end remainder for across expectations fiscal to the the year, across

spending. outlook patient in traffic, both and fundamentals ability the in health We revised grow remain continued dental the and confident share. animal end equipment market markets Our anticipates underlying but muted dental our stable to

our invest does the our this in term. long Furthermore, growth opportunities to for revision change ongoing business not focus strengthen strategic guidance to

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

X in provide each I'll our business the financial Now more detail performance segments. on of

Dental. with start Let's

we XXXX decline growth for by across sales X% approximately tighter reflected Dental fiscal declined than categories, varied had in second with value-added this conditions services market anticipated Our than more and positive Internal in were offset period. equipment sales. results consumables in quarter a

this gaining in approximately delivered a and market dental category. in we growth the from rebound quarter share ago believe We continue modest consumables, outperforming a year-over-year X% to are and

certain portfolio. from no control was material products on there product our Notably, deflationary pricing infection impact in

expected be impact phenomenon would year-over-year As XXXX. that of we after we the stated, of QX negligible fiscal previously

equipment, across continued equipment categories. Dental our about In X% Equipment. were to headwinds We Turning flat sales core internal Internal essentially year-over-year. sales year-over-year. decreased varied faced

declines On side, our up we CAD/CAM fiscal the saw quarter. equipment month even in categories, though digital the second in of picked sales and digital CAD/CAM last

underscore the nature inherently dental and These of equipment the market results lumpy overall dental equipment business on pressures continued the spending.

primarily value-added compared impact And internal attack. dental the quarter in cybersecurity finally, of to year our fiscal ongoing the due sales second Change X% in the nearly category the services period, to prior Healthcare declined

claims customers and new As solutions alternative a reminder, this teams customers services. process to for reimbursement and has transition to processing services incident than inability products and focus for help our on some software rather claims insurance an value-added created required selling

we As from year. a a expect continue expected, QX the the the before basis, becoming a as to sequential on benefit year-over-year trend in fiscal prior lap in impact fiscal comparable impact moderated we QX

is continue of and e-services a important software space, growth invest see I very to mentioned long-term We and earlier. continue to this area as in

Health X,XXX and for on to across to Dental our Pacific customers. all we PDS an allows value Services, recently focused provide than with One of strategic proposition ways core also support example the dental to nationwide. Patterson PDS continue practices of as deepen equipment more services, important relationship merchandise, known premier We're and distributor finding the as network our formerly announced is technology Health's extension which

and through developments equipment and for new with agreement our to expanded practices. products We've in Canada customers large the of an portfolio independent both dental our our strength regional distribution indispensable underscore DSO practices networks, also as smaller partner U.S. These group

prospects our manufacturing events with the discuss continue we practices. their of quarter, all modernizing their across group workflow ways balanced a partners improve and marketing new attended users to dental During digital we categories engaged technology where and current

quarter. sales during the for order second expectation our and met We realization execution

equipment these the purchasers. is all of of reinforcing their and with their choice in train, help and what we equipment them an position to to of Our technology the terms types understand of at events technology can enhance presence support as partner practices of finance, customers service and year productivity Patterson's long engaging extension do how

as Before leadership fresh our various sales and new roles health highlight on, of products companies. care track and Kristin we Dental I from to a new Kristin of and President segment. a Dietzler the strong record achieving in adjacent success appointment introducing the has recent perspective growth want brings move of

are and to to board forward business. dental working our her evolve and have look We on grow with excited her to

in challenging where period for performance solid was the more dental offer we and portfolio markets. customers companion animal partially of This production segment. comprehensive the offset with services Health our business Patterson's to similarly Animal products and end a in

X% the sales our second Internal quarter driven animal mid-single-digit year-over-year, fiscal increased business. in for approximately production growth by

deliver throughout improved also to continued focus second driving P&L the we greater our profitability. to During quarter, efficiencies on

XXXX fiscal clinic business, second In discipline top the growth, by Overall and internal to the be reduced our more year-over-year ways on while in improvement our challenged performance single veterinary sequential by traffic declined margin continued modestly low but quarter. the animal to of supporting achieved business line digits, sales over continues segment profitable that in expansion. focus quarter by moderation for prior our in companion

by in the encouraged underlying animal remain companion the We market market. fundamentals

most We continue caring pets. to focus for veterinarian trust who on their owners place by pet the our the value proposition

opportunities, of mentioned businesses. As proven in continue playbook, our to also leveraging Health we earlier, successful Animal the strategic growth both out we invest across M&A have

growth mid-single-digit in animal quarter the We in our fiscal business, internal continue second production to of see XXXX. momentum generated sales which

a to combination of and gains multichannel value-add species. from performance strong approach share the attribute offerings We our across

to our challenging Our customers. most established largest continue through strong effectively grow was performance which particularly market and some dynamics. managing within while

market. and Animal fiscal performance operational double-digit equipment demand of This electronic Health our growth uniquely of proposition in to in drive demonstrates the efficiencies this value-added value sales Patterson billing. comprehensive process attractive second suite delivered customers such strong well differentiated for a as quarter. category areas software the the makes robust the segment, services Across internal freight as initiatives and solutions partner Our in our to strong services

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

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

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

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

decrease a XX.X%, GAAP XX compared margin was year of gross the fiscal second period. quarter of prior the basis for points 'XX to

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

and an of the previously as portfolio charges impact impairment interest fluctuations the metric a swap part of to income. minimal related adjusted financing the asset equipment a the software net this fiscal in quarter. has also As rate XXXX, second included quarter the restructuring on net In the of mentioned, charge between impact the

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

cases, with to disruption our continue progress to new in claims passed Patterson. some platform, and that make processing impacts business overall we've operations customers, dental We the migrating the a customers and of their

percentage and Our teams and with replace these levels for return our high their revenue to assist diligently with that practice on customers we Patterson. this of a working to their operations, us customers focused stream ensuring ordering are are previous

fiscal XX for compared sales the of basis expenses increase XXXX Our quarter percentage year period. an points of the as GAAP second prior a net were operating to XX.X%, of

deal operating Our restructuring adjust quarter. net in write-off as percentage a and expenses expenses adjusted of our of sales, business impact the prepaid the operating expenses amortization, for inventory

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

growth. invest our mentioned, sustainable we executed cost Don where As structure targeted align to the during quarter, for long-term we appropriate also while preserving continued expense more are to in the closely ability the to experiencing market, our challenges actions

quarter related compared second in of fiscal second to in decline margin Change the 'XX, second a categories margin issue. year-over-year the decrease year. primarily adjusted last sales is consolidated our operating the of XX to to operating points was In A quarter the X.X%, of the related consolidated basis quarter higher-margin in Healthcare decline adjusted

$XX.X diluted Our rate Companies, or a share. second compared prior This points XX.X%, attributable the quarter was Reported $X.XX $XX fiscal 'XX XX was Patterson to in per to the diluted 'XX Inc. last per net tax $X.XX of for reported year or million second of adjusted of basis quarter for second fiscal decrease quarter of income period. compares year to net the share. million of the income

attributable XXXX dental and negative second $XX.X compares of share the 'XX Dental income Patterson income the within and in fiscal was second lower cybersecurity decrease net of value-added or the to $XX.X on 'XX. is or category fiscal continued $X.XX of The Adjusted to Inc. diluted of per the segment. This the to in services per attributable adjusted equipment the reported Companies, second to year-over-year quarter Change sales related million in Healthcare quarter in Patterson $X.XX impact fiscal attack the quarter net Companies, of share. million diluted Inc. of

impacted our quarter Now let's compared Dental Internal as by year sales mentioned, on are turn of of sales in quarter increased fiscal with certain internal to business. In consumables second longer products. our fiscal quarter the ago. consumables Dental deflation second of to no dental business for starting segments, second And 'XX, the control X.X% compared price decreased X.X% business to dental fiscal infection our X 'XX. the Don

second as negatively from well. equipment the vary sales. to applied the dynamics sales in these in ongoing fiscal X.X% the of quarter-to-quarter of specific can decreased equipment of X ago, compared reflecting to quarter impact pressures continued In internal 'XX, categories dental the equipment that year market each by category Sales and have product

period. positive posted This offset core a to the year by sales equipment CAD/CAM quarter, decline compared x-ray growth, in digital category year-over-year prior sales and the

the Healthcare impact Change decreased to cybersecurity primarily in of on year period, Internal over the value-added 'XX sales second of services in business. our the due the of quarter attack prior X.X% fiscal negative software

year margin attack of impact Dental in the 'XX, in The period. basis margin again, Healthcare. the year-over-year X.X% the reflects fiscal operating quarter Change Adjusted was point XXX represents second operating which a of decrease shortfall, over cyber on continued prior the

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

fiscal Internal deep by decreased single Our 'XX digits margin to production customers. sales period. for all and market compared of business their to in animal continues companion wide year prior across low quarter the animal well team species outperform execute our the with approach multichannel second the and of a animal production relationship by

impacted the this in visits low year-over-year on our basis as Our a decline vet The a basis quarter, points in increase adjusted performance margin-accretive focus XX by segment. period. operating was business from X.X% of the our segment prior Animal single-digit well Health in an year on second 'XX as fiscal in margin was

profitability. a other and products process and efficiencies model Health adapt drive to in an team ability maintain improvement their on improve leverage to continuing Animal basis. adjusted their Animal new coming expense to confident to and team Our the execute innovative year-over-year Health market and to deliver operating margin continues on I'm to business

Now and items. me balance sheet cash flow cover let

spending of first in months X in in as flow our million free U.K. $XX.X the cash 'XX the to X in months decrease by improved lap year ago. X made X to of and first ago the months to and first period same compared our of business primarily footprint due fiscal to the Canada the the CapEx increase units the was by we compared 'XX year This distribution the period investments disciplined we management 'XX, fiscal a During inventory fiscal

capital turning Now allocation. to

on diluted 'XX. quarter fiscal quarterly third second at to $XX.X continue declared a dividends We execute In we cash the 'XX, of to to $X.XX share repurchases. beginning was shareholders which of basis, a return shareholders. On share the of per paid year-to-date of then and quarter returned cash our dividend of to million strategy have the through total we fiscal a

revising guidance continued earnings the revised long business, we measures for 'XX earnings outlook to our and our with Today, guidance GAAP conclude the adjusted are cost-saving our 'XX. term. continued investments fiscal This fiscal guidance on to range reflects to our pressure range me and $X.XX Let per share. disciplined for of range $X.XX diluted on to our spending $X.XX with macroeconomic balanced $X.XX the remainder

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

Thanks, our Kevin. customers. position strategy, quarter, operations serving to on maintained growth. to our has our want on entire our fiscal across and a hard thank proven challenges focus Patterson the team Patterson market rightsizing strategically executing and long-term Despite the continued our the business for commitment second work sustainable team laser end in to I continued their for investing

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

first Cherny today line from Your from Leerink comes the of question Instructions] Partners. [Operator Michael

with start Maybe if guidance. we the can just

outside outage you if impact in I As the that change well specific think control, you can and is you much change how of would of your think any from guidance as control the is say, reduction, areas about as it terms that's versus market-driven in stuff of do both there the offset?

the of would I direction the any versus other off in are given kind understand see market And if of I that some want you of what not dynamics? if pieces OpEx-driven offsets? change say guess, are positive is can pointing necessarily surprising in the the view gross we there I to reduction

can our start, environment maybe Yes. I'll that's an out in give items -- would mean obviously, a think little a are of I is challenging maybe point say really to more I guess, -- I element and I I'll I of Kevin that big the Well, maybe it the our I'd then have thanks, Michael, detail. control. number segments

make thing we the to can doing that I cost manage to that reductions the in that we the we're that that think primary thing place. -- sure is put

that trying we're sure that, at we maintaining fund while look we financial when our objectives to performance. our balance making And strategic can

a there. I you are out moving those for know. X there's control so headwind think But market, several as some of quarters, the balance our a that's in And the persistent our One, here business parts of of parts. been and

the the if add. I any there like Kevin Maybe detail But taking things additional see I'll control. we're to point that our he'd to actions are would in has

Right.

our the back for appropriately As forecast think refers Dental adjusted particularly half of year, for to segment. rest the sales our said, Don the we've outlook in the year, like I

our our mentioned Health As Animal animal performed we in really business, our well. continues comments, business, to production particularly

as the software over as So that on see Healthcare Change we we us lap as well dental will improvements helping to have business, here continue fully lap we QX. the issue, in which

OpEx bottom cost there our we terms reduction action we that bottom saw the assumption in number then cost really that segment also took to the QX. -- to that main of make there dropping We've have of the through are our out excellent in this line. And good of the done good get showing here reductions in offsets waste, that those reduction half their teams sort results the Michael. sure good logistics efficiency on a operating and seen even the as well into are beyond network, pricing say dropping in of are here that, back so to we built markets initiatives line to that we really gross I'd that that's really adjustments of margin as job evolve guide, of And results for expect the are sharp a

of stream I And needs of levels, to I'm place you year, improvements operational forward about into That's on next happen organization, to to helpful. current excellence? get the your and you dynamics the you obviously not guidance, leg a it. you as to the the to into but be appreciate about 'XX? certainly that are And end you How essentially retrench. trying you here, Got As as get the sit think will based what demand for steadier generate to want path 'XX environment or profitable be do that to change? at growth think else the thinking

Go ahead. ahead, Kevin. Go

benefits top our Yes. -- It's model from line leverage. obviously

some continuing So strong And that make get business of those are business focused investment what and sure amount software driving of in a go that this of that. it's that driving the expansion. again, that is business seeing business initiatives runway of the think, we're some business our positive fair where, in lines that see mix we're the as strengthen still kind those our strategy as model, margin the get of a again, we're that I coming key one portfolio model new things continue our part out margin enhancement to to operating But driving really to on right team is on of well back we year. I drives health of that's to their the their

but lost to the and our that. quarters. for maybe X to macroeconomic that's And add expansion has the conditions, think slowly Animal I'd point looking to -- to think help going important margin I that. of improve I business would last it's Health that I I in just performance, out, had we're something sometimes mean the our And gets then Yes. segment -- and in Dental X particularly

initiatives of the expect Animal And we to and so drive with, excellent even segment And this that margin on to Health dealing a improvement. by that kind in execute environment improvement of that continue. operating continuing they're number they're performance

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

if question Maybe I just guidance, on could. another

costs the talked for, calling growth growth. Still So that. to guidance, cost you the $XX million kind if credit year. on almost Kevin, takeout, this easy kind as give the tied those year And from I the to about I talking XX% half you little comps in of year half look comps second EPS about in first this year I half of XX% makes the half, versus of back half it's really X% a year the half I Obviously, XX% the prior, to that of get in last sense. in EPS tough about easier are the in second think, EPS but of year-over-year back half know at the back if

So it just seems where to me even even seems first is X% guidance? to that still What XX%, the embedded current savings, from after going to adjusted to on giving year you half XX% like has change credit basis growth on in to trajectory X% the cost year-over-year ramp. steep been the EPS an down a

happened Again, we've a forecast significant to last impactful Healthcare that in year, QX was the so do -- compared [indiscernible] benefit we to to, highly think our Yes. will see Change it -- March see of appropriately That of 'XX. I year QX in I'd our disruption. because point we was last of fiscal

where lap by we're needs be. Like progress to really said, I it up in to good business back that And getting that. QX, making we'll

we'll year some balance -- a that's some I'd Jeff. And other So below [indiscernible] are things operating we'll in of done income we've half the see thing the sheet. improvement benefit our year-over-year the on really then good see, significant say, back

provide share to compared that's going prior in year EPS. half and count tailwinds the also lower interest our the the to have down expense some We'll year a So to of is going back be for year-over-year.

you We'll about maybe is guess, just know X intertwined a helpful. we've there. those just your and for SKU are business? in or overlap us much a completely give businesses that's us of your you many vet look alternatives in It's had main operationally you you while strategic can in your much on fine. going factually, intertwined? have overlap your centers you services overlap Okay. shared it, facilities? factually North Markets us on and base I just That's can are? a there Just how Capital question remind you not I said speaking they anything between distribution America, how and been to Day. Don, how you're talk Can How might the since dental you those of

bag Yes. presentation -- be much and probably responsive say it's number in terms No, also it's how service we And a have is. time, mixed would maybe longer here. really over But much there's specifics. there we -- do of there's to would certainly through that to are I really -- more centers, of integration, overlap a really not that mean both longer service the business. We done segment. centers have, a have in -- side need all much each Jeff. it's I thanks, that trying do -- get specific distribution just -- a to

a And so it's bag. little mixed bit of a

there's I I it there's call think the each. of devil a would but -- -- bit probably, lot we'd a have to detail, get into just more

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

sort the macro environment company and the position the way to that you your of of and to it the of about sort is I picture prompted in of or do what, Board know a sort currently? macro you of lot more mind, big potentially Is company the question alternatives, the the market or the operating the the talk Board assets is to go of in this? and a Patterson's really more is strategic can't it the but prompted valuing

us, far this Yes, like but I like I there's and our can end get what today too sound decisions focused the that's that is what kind the I I Kevin, do of I number and just I this. don't is on. of value, always enter record day, into broken I of mean, mean hope a to read real the maximize want again, into statement. on shareholder main we I'm say maybe topic. would Board to the at point a And mean really questions here, we things not don't think -- I for

Helpful. follow-up dental consumables. on And just a

Is to imply You little Does market think the believe is you're you you're think you said is maybe expecting and about bit in flat? up talk X%, still share. you pricing that can down? And the take I market you a the do said consumables? -- -- market

tailwind Has not a been headwind a that -- or or any...

what you said? that is Pricing,

just the market pricing? the wondering and on what's consumables I'm happening side. Yes, pricing within about with and sort mix of

data Yes. we some I market And the to I'm of think breakdown in say market Well, to we in flat as of you sure the potentially -- and terms down. consumables view as if Kevin, the a what maybe maybe, there not just would slightly -- have. want you --

be Yes. continue From fairly -- I stable. think we'd to say visits

about spending we there's still the dentist. were going the market are seeing little we've But so PPE on portfolio, on track as I deflation a in standpoint, the while pricing to of of coming less talking been pandemic. essentially has people it. this From impact been quarter, for that a for goods decrease categories visits that we basket out in that and and of stabilized, still particularly of a think that that our hasn't

normal that a say tailwind from we'd pricing our to in of of a terms should expect manufacturers I'd So advances bit sales. "normal" that where of more entering overall sort provide And headwind price sort is a gone. environment here of we're

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

back of quantified rate, cost early get think there result that some one. annual about in as plowed it, savings think quickly? quick as you run that net $XX the million XX the it, So investments number? should the that would $XX number maybe some And I net do a -- of back, was in back get sort a then you just edges year, that in around are a or part there we fiscal different this as time that the The first that is annual million call that

Yes. back half primary QX, Well, annualized. some bit get the the that but we the a of -- at benefit benefit did benefit a is in $XX of year million

and have line in kind -- expense but it, opening, some very long-term continue headroom of our our to So as us in that I mentioned invest helping think the strategic alternatives impact. at also giving helping we structure, important that great as additional as of the part look to we bottom

of half in year. the and then benefit a So it's in but slight benefit second full QX balance, the

Can for but just you According -- sometimes it straight Okay. you numbers, said weakest And Got market it give rates helpful. gears, be marginally Like to can the COVID. Very us starting Maybe just it in was our bouncing, was it. more be quarter. there? could sixth to shift are dental then the give equipment, little the since stack but the a down down. to X-year maybe environment. you come more can you shouldn't color bit us

hands until this your DS come your other a material just some, should What amount partners? going call are it, Arguably, more down World get market sitting opinion, we on than can you and/or manufacturing the rates add innovation in of sort from October our get again stub. your incremental

would I Yes. here. really topics going we're down, Well, on just any kind or X have up that think there but I the of come bit reduction the to mean rate need significant I I you impact more impact hit think to rates a there. have

challenges macroeconomic There's thing here. look, And are us. is I innovation then, -- the yes, the key unique not to mean,

they also -- help also and I'm the some budgets, impact partners of therefore, sure. innovation manufacturing they our So

think just rates but then is top innovation a overall a environment. the more. -- of get the key little more the it's have to on it, rates, of come down just little of so And on positive kind momentum I And a maybe macroeconomic part

don't comments know there? additional Kevin, I any

that. Yes, I agree with all

us. Dental in through, we're and -- folks that would so innovation, good I equipment our usually, sales really say comes that usually that when think benefits

helps. So in the seeing more innovation market

bit for And through helps economic facility core I that upgrading our expanding terms technology. interest make like investment of or of their in a practices expand big practice spending kind business more patient of looking either their to or a coming equipment to lower next that more we're a tailwind, think said, Don rates in either are

I agree So with think all said, what the I are Don at. factors looking we're those

of Next Morgan line the question Wright from Stanley. comes from Erin

Great.

distract Does around internal in about but alternatives. or efforts? of ongoing describe that So you thinking initiatives? the you sounds think strategic in like making, at this some about of little how all can as more review teams of does light cost that investments influence a those of the potential you're terms their it's It then just business the ongoing structure you bit this you're initiatives and that not, efforts

past, part, of in bit presumably, a medical the this can't around assume what's I little kind strategic contemplated this reviews whether than it we this in but guess, before And one but more gone Patterson is proactive. maybe how has been otherwise, was answer I through is past? or different the

Yes. offerings. in for us and investment Well, software our area value-added main highlight continued the important I that I the might here, is I think services that's we've talked about, that just think

And initiatives. important revenue-related important looking of I was opportunity. sales-related long-term to strategy to fund we so and and these our strategic an continue of we big not can and the actions, thought cost that as make impact a sure mentioned, also to area very that growth about When that's activities part

the so those And focus that, think I view things. for long-term us that's on on

running about strategy interplays now that, vision so focus comment. to really thing the that might and And anything mean how don't with of the interplay else I the in than terms long-term going is alternatives, a thinking we're eventually do. we're that it again, with to more I business with strategic we're think and just want how on the I

in going And the to Okay. the That's do well reflect on guidance more discussions relationships any contract agency favorable moment? of dynamics fair. innovation coming market given more at Health and in there the potentially you of through? they versus going the are then products, just more Animal or competitive terms buy-sell side, new does increasingly of are manufacturer think changes and potentially kind access And are those favorable -- some the on

built relationships, both teams anticipating guidance. the kind team at manufacturers and are productive executing the is are we're rest in in think has mix and conversations this the Erin, distributor of we're having the really strong whole those time talking market, manufacturer with changes all I and point, the significant well those we're And not forth. manufacturers. back because discussions good of any our this our say into I'd say buy-sell I'd of that Kevin.

So...

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

a been at start do all this top P&L? When fiscal offer these you've does several We investments clearly it's can to benefit for about putting for software muscle now, start the lot talking you all. effort. priority Don, behind see of quarters for to When the 'XX? it your give returns? can making. you there all in credit you Does you're Just so investments any provide can show investment visibility we the the

momentum Well, good we Yes. have we like here, feel Jason.

think yet. 'XX too into you'll puts want say and I So see get definitely, I some impact to don't and takes far in would fiscal

have statements, into as we'll vision next forward of guidance. see here QX better they the that and would making the ourselves obviously the really that the QX think we get good move as show will impact when progress here. financial year. start I we call I up to and as really we how then of into our a And do think just course, But numbers fiscal we

XX% -- 'XX. more Adjusted it's it let's Okay. All fiscal just dental in this helpful. is going we're operating operating if margins, where much, 'XX. Dental about versus pretty the in that call right. for is recently year be That's at some Kevin, look today, flat. looking make down or just you business income where like at revenue finish versus hasn't 'XX changed on to Dental was assumptions basic where you'll fiscal

what's your for you've sounds along like when can deterioration a comments when way last the years? to reduce profitability, just changed improve from actions your in happened and efficiencies. business understand hasn't to already X earlier, help So the such really taking especially waste it us been you revenue that's led And

to point Jason, brought we I'd of them X things, both Yes. up. and

keep really of the and X profitable impact -- Change to I -- we big it operating business myself on is repeat up, a impacts think margin on I it's One it, but very this disproportionate has that that our performance. feel navigate here. have nature much Healthcare I dynamic, I and bringing through too the

that we've on And it building been sort of of weighed has that business. so back the incident performance really up, when margin since happened and our

up software. then the the the past are And -- the how investments where we're year-or-so, franchise software way we're investing business, in highlights also, in that that's I why we show business over in Dental making think, is. really the X.X And years,

in spending that and the support spending And OpEx increased so capital to we Dental have business.

and in track of been as Don Change into those making and seeing the software beyond, we services that have that in and part benefit the portfolio incidents And as the get that start OpEx Dental said, of investments will our lapped fiscal we'll we get 'XX Healthcare business. on we've

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

-- line there's maybe basis? for about the keep shortfall, I of Patel little to keep keep that taking, medical. I margins Are ask you're the cost you top margins topic Sameer Elizabeth is or on This you Anderson. a But just wanted revenue you a realize actions are on here. a just that of year-over-year corporate bit can flat thinking on particularly still on

that? do Kevin, take you want to

Yes.

in our one other said you did of So Did you medical, mean you? segments?

[indiscernible] Dental.

Sorry.

And slightly mix impact of standpoint, last it's half market. I cost year I does That's And in actions it blunt of by to margin the okay. versus year. I a Yes. those we software in back in benefit of business. contemplate think help -- be like actions, the those remarks, the impact said mean softer up our as I to Yes. the the flat again, earlier expect the think really we from do us an op driven plus

Got it. there animals. change XQ talked think you're companion or before you And about still I how that in that, line? about impact XQ Is customer that moderate is starts time expectation reprioritizing then and your that in base within any thinking to

products really are to have portfolio should some a also new come into bringing of will actually done here That going forward. their it help going in here some moderating trajectory that on Yes, to back half. we're that customers job back happy their also the start team half that new here the and growth in has good

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

for market consumables for flat It is to like dental down. the slightly One Kevin. sounds

that think back XXXX that half you are of really expected I things here. and would think by that that no numbers improve coming down. the the And it's your surprise I peers

exiting market think the from guide? we that implied to anything the dental half October was expectations the there the August in what's and for call out As of for second And September? currently is then consumable about different year,

of us continue expect terms a are got -- environment. in say Again, expecting a I QX, saw to low here think market guide, to that single-digit to in by bit. consumables we've specific I'd we initiatives of you going kind help some the the out-execute we're

we necessarily from So saw the QX in what the significant change of for a year. rest not

and little a wouldn't I then choppy I performance, -- And month-by-month can of I say get depending on kind to certain you don't get want think things. into --

all the for do year, of guide And end in the we just account So QX. rest year, projecting the not for as I'd here a certainly kind that. our thought we environment in significant see what that's say uptick about the into the we we're that of of overall, took markets from

fully of way fee And maybe back Okay. quarter those weren't of you that then quarter second to a any where you quantify the of the think getting a percentage a X ago? as little in That's about weren't? half are or helpful. going transition the here, bit running, up is customers or Just you provide of more to and there we trying where where submitting Healthcare back ago, Change granularity now the incident, that that on are in or fees getting get getting claims and are a you're a we sense to maybe year terms

a we of terms essentially we in kind say, set year. standpoint what business, -- the budgeting the Yes, from of we're I'd out on expected software we're when

I net quantification, was think believe I'd terms year, Healthcare in from of when results tell what is QX you the our drag I announced last Change $X.XX. we

have into in. of the this business favorable back we year, that of comp that's So we as comes sort get kind QX of is

customers also I that that on as, said, claims team get well well, our provider overall well and a software I do job performing like here. this kind e-services bringing of are good going back new out, getting franchise should too, they've helping as those of business also point to done good to And really providers are back continues new that some forward that on

Your the Securities. Valiquette Mizuho Steven from of next from question line comes

equipment digital any on the major bigger first, fiscal with middle manufacturing that in your if their not wasn't there's big manufacturer launch partner, is needle enough to results. seems question like second guess, of quarter. curious same a move much in distribution they with the the dental with renew to have that the major you, my did it that. that really intention It contract that I product updates just just announced really, But new

outlook But big in the the product for your Or new other question 'XX? to this outlook equipment launch? cadence mind, digital of launch for change words, is, your that new worse enough even is with product in fiscal of equipment remainder your your will without the be

the one second Well, first. maybe I'll take

and I program think participated in there. quarter, the look, we during World -- had DS I no, like helping -- definitely a felt our successful think results. I We

And macroeconomic so it's helpful. battle the equipment Certainly, we continue to conditions. the market, in just overall softness

that we the be little a emerge technology yet fares. new seen -- maybe bit how how that, from as to So

as which contract. the and with as in continuing but They're all focus, with the this is we to of drive goal, up to I with our our same we're we deep -- mutual we terms the our one contract have end many here through In them success main talk World. have work supplier relationships is think We a them supplier. DS value We of wrapped

I mind. And objectives so play don't in -- to out. think the get that same of But I you may specifics both want wouldn't into how have the

more of a win-win. a It's be through process. So working matter ultimately, I think can this just the maybe

line Your from of Blair. Vazquez final from the William comes question Brandon

ask upfront. have just X. I'll I

is it's Health years in maybe kind some forward pull The Dental markets. both macro. know that end I now like Animal COVID, week that. been things just I've is -- a we've these have and Conversation through been just investors of had recently lot that on been digesting first with

there something -- of else a we're any both making sense But -- is you there's because for bit market? more, as under damage back tougher is for a the and curious rebound up is coming it structural market the of to spaces? Is simply waiting underlying I'd that's question come little easy just there feel this on this good a as any going to be for or consumers more there have guys frankly, that

unrelated, key follow-up you of guys being China around now, Do with terms box exposure check to in then countries to tariffs. any but just And Mexico have Canada, question, the or the manufacturing? the right questions more discussed

second take here. the Maybe let I point. first Yes. [indiscernible] And question can I'll first Kevin

Yes. it. supply all team, tariffs, I you is chain just on as say our can imagine, over

We import around and the imports, partners from small our other manufacturing but have some suppliers relatively direct world. obviously,

been really in sure is -- closely tariff that's working it implemented that team them regime plan to the a got right we've here. with a we've got when has So place make

that question, on my perspective, has anything fundamental guess that And markets. there's don't from I I Yes. your our view changed first in

disruption, I extent, to unprecedented a obviously, think little flows bit COVID and still some the was through.

matter think mentioned sentiment we of that maybe with business. have I conditions the as -- equipment I I and dose sure the dental the just on but a it's the before, improving. just consumer it's And additional additional the -- side right of, economic believe innovation really in of making level

will back our call final to concludes session. Zurbay some that over And Don for closing question-and-answer I turn the now remarks.

today All interest Companies. We'll and time for right. all off. Thank you in sign your Patterson

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

You disconnect. may now