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Patterson Companies, Inc. (Nasdaq: PDCO) is a leading distributor of dental and animal health products, services, and technologies in North America and the U.K. The company connects its customers to a wide range of consumables, equipment, digital solutions, and value-added services, enabling operational and professional success. Patterson Companies operates through three main segments: Dental, Animal Health, and Corporate, with a focus on delivering innovative business solutions and exceptional customer support.  **[0000891024-24-000008_pdco-20240427.htm:118]** **[0000891024-24-000008_pdco-20240427.htm:74]** **[0000891024-24-000005_pdco-20240127.htm:22]** **[0001193125-24-163059_d834734dex99.htm:6]** **[0000891024-24-000013_pdco-20240727.htm:23]** **[0000891024-24-000017_pdco-20241026.htm:27]** **[0000891024-23-000012_pdco-20231028.htm:20]** **[0001193125-24-208250_d888887dex99.htm:6]** **[0001193125-24-271123_d843108dex991.htm:4]** **[0001193125-23-057315_d488148dex99.htm:4]** 

1. **Animal Health** - Distributes animal health products, services, and technologies for production-animal and companion-pet markets in North America and the U.K. Includes consumables, equipment, and value-added services.  **[0000891024-24-000008_pdco-20240427.htm:118]** **[0000891024-24-000008_pdco-20240427.htm:74]** **[0000891024-24-000005_pdco-20240127.htm:22]** **[0001193125-24-163059_d834734dex99.htm:6]** **[0000891024-24-000013_pdco-20240727.htm:23]** **[0000891024-24-000017_pdco-20241026.htm:27]** **[0000891024-23-000012_pdco-20231028.htm:20]** **[0001193125-24-208250_d888887dex99.htm:6]** **[0001193125-24-271123_d843108dex991.htm:4]** **[0001193125-23-057315_d488148dex99.htm:4]** 
   - *Consumables* - Offers pharmaceuticals, vaccines, and other recurring-use products.
   - *Equipment* - Supplies diagnostic and treatment equipment for veterinary practices.
   - *Value-added services and other* - Provides additional support services and solutions.

2. **Dental** - Supplies consumable dental products, equipment, turnkey digital solutions, and value-added services to dentists and dental laboratories across North America.  **[0000891024-24-000008_pdco-20240427.htm:118]** **[0000891024-24-000008_pdco-20240427.htm:74]** **[0000891024-24-000005_pdco-20240127.htm:22]** **[0001193125-24-163059_d834734dex99.htm:6]** **[0000891024-24-000013_pdco-20240727.htm:23]** **[0000891024-24-000017_pdco-20241026.htm:27]** **[0000891024-23-000012_pdco-20231028.htm:20]** **[0001193125-24-208250_d888887dex99.htm:6]** **[0001193125-24-271123_d843108dex991.htm:4]** **[0001193125-23-057315_d488148dex99.htm:4]** 
   - *Consumables* - Includes dental supplies such as adhesives, cements, and other materials.
   - *Equipment* - Offers dental chairs, imaging systems, and other capital equipment.
   - *Value-added services and other* - Provides digital solutions and professional support.

3. **Corporate** - Manages general and administrative functions, customer financing, and miscellaneous sales activities.  **[0000891024-24-000008_pdco-20240427.htm:118]** **[0000891024-24-000008_pdco-20240427.htm:74]** **[0000891024-24-000005_pdco-20240127.htm:22]** **[0001193125-24-163059_d834734dex99.htm:6]** **[0000891024-24-000013_pdco-20240727.htm:23]** **[0000891024-24-000017_pdco-20241026.htm:27]** **[0000891024-23-000012_pdco-20231028.htm:20]** **[0001193125-24-208250_d888887dex99.htm:6]** **[0001193125-24-271123_d843108dex991.htm:4]** **[0001193125-23-057315_d488148dex99.htm:4]**

c2a916b59a3739dfaa861fbaae693d1a9bf95480c9d93937a3d173885fef2a5c

- **The company expects headwinds from the Change Healthcare cyberattack and deflation in infection control products to abate, leading to improved performance in the coming quarters**  **[PDCO_3400047_20]** ,.  **[PDCO_3400047_13]**
- **Patterson remains confident in its ability to grow Dental consumables sales and capture market share, anticipating a return to growth as timing issues resolve**  **[PDCO_3400047_20]** ,.  **[PDCO_3400047_10]**
- **The strategic focus on higher-margin business in the companion animal segment is expected to improve profitability as the company progresses through the year**  **[PDCO_3400047_14]** ,.  **[PDCO_3400047_12]**

9e248a9de9d66a74788299de4eb009fac0f2e326ddec07c67eb2a7003c6bae14

Dental

- Consumable

- Equipment

- Value-added services & other

Animal Health

Rehabilitation Supply

Corporate

Total Revenue

7196d6dab30aeb146d67422163e3b08334ab26e4096afcdec61752396b2b933b

| **Program Details**        | **Program 1**          |
|----------------------------|------------------------|
| **Approval Date**          | **March 11, 2024**  **[0000891024-24-000017_pdco-20241026.htm:41]**  |
| **End Date/Duration**      | **March 16, 2027**  **[0000891024-24-000017_pdco-20241026.htm:41]**  |
| **Total Additional Amount**| **$500 million**  **[0000891024-24-000017_pdco-20241026.htm:41]**    |
| **Remaining Authorization**| **$450 million**  **[0000891024-24-000017_pdco-20241026.htm:41]**    |
| **Details**                | Manage capital structure and return value to shareholders while maintaining flexibility for M&A opportunities  **[0000891024-24-000017_pdco-20241026.htm:41]** **[PDCO_3392572_27]**  |

a55b1d980092296df21297c4a61357d3b211fd023e13b45208ebf3763485fdc6

United States

United Kingdom

Canada

International

37ca1a056967c60fe7af4a08da261a74637923aa3c2d838a66211eee68c44320

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

1. With the announcement that a major dental manufacturer intends not to renew their distribution contract with you, how significant will this be to your dental equipment sales, and what specific strategies are you implementing to mitigate this potential impact on your business?

2. You've revised your fiscal 2025 adjusted earnings guidance downward due to continued macroeconomic pressures; can you detail the primary factors driving this revision and explain why your cost-saving measures aren't sufficient to offset these challenges?

3. Considering the ongoing softness in the dental equipment market and the need for innovation, what are your plans to stimulate growth in this segment, and can you provide specifics on any new technologies or partnerships you are pursuing?

4. You've been investing heavily in software and value-added services to drive long-term growth; when do you expect these investments to start contributing meaningfully to your financial results, and what milestones should we look for to assess progress?

5. With the evaluation of potential strategic alternatives, including a sale or merger, can you elaborate on the factors that led to this decision at this time, and how do you intend to ensure this process doesn't distract from your operational goals and commitments to stakeholders?

b69cf1d89f0c58a91aa91e665b15f7ae26426c62a6f5a1776354dd3f87b1b820

### Q2 2025 Earnings Call
- **Issued Period**: Q2 2025
- **Guided Period**: FY 2025
- **Guidance**:
  - **GAAP Earnings Guidance**: Revised to **$1.83 to $1.93 per diluted share**.  **[PDCO_3410945_8]** 
  - **Adjusted Earnings Guidance**: Revised to **$2.25 to $2.35 per diluted share**.  **[PDCO_3410945_8]** 

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: FY 2025
- **Guidance**:
  - **GAAP Earnings Guidance**: Reaffirmed at **$2 to $2.10 per diluted share**.  **[PDCO_3400047_7]** 
  - **Adjusted Earnings Guidance**: Reaffirmed at **$2.33 to $2.43 per diluted share**.  **[PDCO_3400047_7]** 

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: FY 2025
- **Guidance**:
  - **GAAP Earnings Guidance**: $2.00 to $2.10 per diluted share.  **[PDCO_3392572_8]** 
  - **Adjusted Earnings Guidance**: $2.33 to $2.43 per diluted share.  **[PDCO_3392572_8]** 
  - **Sales Growth**: Low single-digit growth expected.  **[PDCO_3392572_8]** 
  - **Operating Margin**: Expected to be roughly flat compared to fiscal 2024.  **[PDCO_3392572_8]** 
  - **Impact of Cybersecurity Attack**: Modest negative impact expected.  **[PDCO_3392572_8]** 
  - **Interest Expenses**: Slight increase compared to fiscal 2024.  **[PDCO_3392572_8]** 
  - **Tax Rate**: Expected to be 24% to 25%.  **[PDCO_3392572_8]** 
  - **Average Share Count**: Expected to be lower than fiscal 2024.  **[PDCO_3392572_8]** 

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: FY 2024
- **Guidance**:
  - **GAAP Earnings Guidance**: Revised to **$1.99 to $2.04 per diluted share**.  **[PDCO_3375427_7]** 
  - **Adjusted Earnings Guidance**: Revised to **$2.30 to $2.35 per diluted share**.  **[PDCO_3375427_7]** 

8e67025b6ba5ce3cf5b11a4f3582a2c2a8638ba19f65fb62ab4e122287250513

1. **Strategic Alternatives**  
   **Q:** What prompted exploring strategic alternatives?  
   **A:** The company aims to **maximize shareholder value**, and the Board is focused on this objective.  **[PDCO_3410945_14]**  They are considering strategic alternatives to achieve this goal.

2. **Guidance Reduction**  
   **Q:** What's driving the reduction in guidance?  
   **A:** The guidance reduction is due to **challenging market conditions** in several segments, which are **outside of our control**.  **[PDCO_3410945_10]**  To manage this, we are implementing **cost reductions** while balancing investment in strategic objectives.  **[PDCO_3410945_10]** 

3. **EPS Growth Expectations**  
   **Q:** How will you achieve EPS growth in the back half?  
   **A:** We expect EPS growth supported by **lapping the Change Healthcare disruption** in Q4.  **[PDCO_3410945_12]**  Additionally, we anticipate benefits from **lower interest expense** and a **lower share count**, providing tailwinds for EPS.  **[PDCO_3410945_12]** 

4. **Software Investments**  
   **Q:** When will software investments impact the P&L?  
   **A:** We expect to see benefits from our software investments in **fiscal '26**.  **[PDCO_3410945_16]**  We are making good progress, and these investments will start showing in our financial statements as we move forward into the next fiscal year.  **[PDCO_3410945_16]** 

5. **Operating Margins and Profitability**  
   **Q:** What's needed for profitable growth into '26?  
   **A:** We're focusing on **driving the right mix** of business to expand operating margins, including investment in our **software portfolio** that drives strong margin enhancement.  **[PDCO_3410945_11]**  Improvement in **macroeconomic conditions**, particularly in Dental, will also help.  **[PDCO_3410945_11]** 

6. **Dental Operating Margins**  
   **Q:** Why has Dental profitability declined?  
   **A:** The decline is due to the **Change Healthcare incident**, which impacted a very profitable part of our business.  **[PDCO_3410945_17]**  Additionally, we've increased **OpEx and capital spending** in Dental to support our **software investments**.  **[PDCO_3410945_17]** 

7. **Dental Equipment Market**  
   **Q:** Can new products improve equipment sales?  
   **A:** The new product launch is **helping our results**, but the equipment market remains **soft** due to macroeconomic conditions.  **[PDCO_3410945_26]**  We're hopeful that innovation and eventual rate reductions will stimulate demand.  **[PDCO_3410945_26]** 

8. **Dental Consumables Market**  
   **Q:** How is the dental consumables market performing?  
   **A:** The market is **flat to slightly down**.  **[PDCO_3410945_15]**  Pricing has **stabilized**, and we're entering a more normal pricing environment with expected **price advances** from manufacturers providing a tailwind.  **[PDCO_3410945_15]** 

9. **Animal Health Performance**  
   **Q:** How is the Animal Health segment performing?  
   **A:** Our Animal Health segment has achieved **margin expansion in 6 of the last 8 quarters**.  **[PDCO_3410945_11]**  We expect this **excellent performance** to continue.  **[PDCO_3410945_11]** 

10. **Overlap of Businesses**  
    **Q:** How intertwined are your vet and dental businesses?  
    **A:** There is a **mix** of integration; some distribution centers **serve both** businesses, while others are **specific** to each segment.  **[PDCO_3410945_13]**  The overlap varies across operations.

3d3164edc79fa7019aeee51f27f6b2df356f6fb42c4ef836f74cf445cdecaf5f

- **Patterson Companies is outperforming the market in dental consumables**, achieving **mid-single-digit growth** and **taking market share** due to strategic initiatives, strong value proposition to customers, and investments in servicing Dental Support Organizations.  **[PDCO_3392572_10]**
- **The Animal Health segment delivered record operating profit** in both **Companion Animal and Production Animal businesses** this quarter, driven by strategic focus on higher-margin business and operational efficiency, even as sales in some areas declined.  **[PDCO_3392572_12]**
- The company is **well-positioned to capitalize on innovation and competition** in the Animal Health market, particularly in high-growth categories like dermatology, leveraging their strong customer relationships and sales force to drive growth and margin expansion.  **[PDCO_3392572_21]**

c0794dfe103ebc018d09fd5013d7d29e470b7579f0882a8bbbeaab3be6cc303e

- **Cost-saving measures are expected to keep operating margins flat to slightly up in the back half of the year**, driven by the impact of cost actions and the mix benefit in the software business.  **[PDCO_3410945_22]**
- **Growth in the companion animal business is anticipated to improve**, as the impact of reprioritizing the customer base starts to moderate, with new customers and products expected to help the growth trajectory going forward.  **[PDCO_3410945_23]**
- **Significant software investments are poised to benefit the company's financial performance starting in fiscal '26**, indicating good momentum and progress that will start to show up in the financial statements in the next fiscal year.  **[PDCO_3410945_20]**

ee37aa0573c7b905eb272d93d9b18309ec7d445a7b055a48e9535ea35438b5ce

- **Patterson Companies continues to achieve above-market growth in dental consumables, with over 7% growth excluding infection control products, and believes this growth is sustainable.**  **[PDCO_3375427_15]**
- **The company expects improvement in equipment sales as they move into fiscal 2025, anticipating that equipment performance will improve due to a stronger market and their position in it.**  **[PDCO_3375427_9]**
- **Patterson anticipates margin improvements as they focus on leveraging operating expenses and investments normalize, which will enhance profitability.**  **[PDCO_3375427_13]**

73734d700f670111230acfd3b9051a3ce0be7304328157df2720587dc451dc54

- **Continued negative impact from the Change Healthcare cybersecurity attack is affecting Dental segment revenues, as the revenue per customer on the new platform is slightly less, and ordering patterns have been disrupted.**  **[PDCO_3400047_13]** **[PDCO_3400047_10]** **[PDCO_3400047_20]** **[PDCO_3400047_15]**
- **The company is implementing cost management actions, including potential headcount reductions, to meet financial targets, indicating pressure on margins and profitability.**  **[PDCO_3400047_18]**
- **Margins in the Companion Animal segment were impacted due to strategic decisions and inability to earn rebates, leading to margin pressure that may continue if sales targets are not met.**  **[PDCO_3400047_14]**

9757eb25a3f8b24dd0cc433e33f4272bd50cd455a9ce0b2628bf2ee43efd1f1b

- **Continued decline in dental equipment sales is expected, with projections of **low to mid-single-digit decreases** in fiscal 2025, reflecting ongoing challenges in the equipment market.**  **[PDCO_3392572_25]** **[PDCO_3392572_18]**
- **The Companion Animal segment underperformed, with sales **declining in the quarter** and anticipated **low single-digit growth** in fiscal 2025, which is softer than industry expectations, potentially impacting overall revenue growth.**  **[PDCO_3392572_12]**
- **The company plans to **reduce share repurchase activity** in fiscal 2025 compared to fiscal 2024, which may lead to decreased shareholder returns.**  **[PDCO_3392572_27]**

f5fb1a0433a69e5eed6390584c3ca35eb52c29d7f51feeb6597e993633ecd63d

- **Patterson Companies is facing challenges in the dental equipment segment**, with difficulties due to **macroeconomic pressures, higher interest rates, and selling price declines**, impacting performance. Executives acknowledge that equipment sales growth has lagged in recent quarters due to these factors.  **[PDCO_3375427_19]** ,  **[PDCO_3375427_9]** ,  **[PDCO_3375427_13]**
- Despite growth in consumables, **operating margins did not improve** due to increased expenses from investments in distribution facilities and software, impacting profitability.  **[PDCO_3375427_13]**
- The company's **value-added services in Dental were flat** year-over-year, suggesting a potential slowdown in this important growth area.  **[PDCO_3375427_20]**

b3432d0be62cdb8f9166a868eb27c3017f8f2f3dca14776ed41d3c4346159aca

- **Persistent Weakness in Core Markets:** Both the Animal Health and Dental markets have been **weak for years**, with concerns about potential **structural damage** affecting their ability to rebound. Despite management's assertion that there's nothing fundamental that has changed, the continued **weak end markets** could signal deeper issues impacting Patterson Companies' growth prospects.  **[PDCO_3410945_27]**
- **Deteriorating Profitability in Dental Segment:** Despite **flat revenue** in the Dental segment over the past two years, **adjusted operating income is expected to be down 10% or more** this year versus fiscal '23, indicating a significant **deterioration in profitability**. This is due to the ongoing impact of the Change Healthcare incident and increased OpEx spending on software investments, with benefits not expected until **fiscal '26 and beyond**, potentially leading to continued **margin pressure** in the near term.  **[PDCO_3410945_21]**
- **Reliance on Cost-Cutting Amid Market Pressures:** The company acknowledges a **revenue or top-line shortfall**, particularly in the Dental segment, and is relying on **cost actions** to maintain margins. This suggests that Patterson Companies is facing challenges in driving organic growth and is dependent on expense reductions to offset the impact of a **softer market**, which may not be sustainable in the long term.  **[PDCO_3410945_22]**

eaebb105aa98e23418fe7752a8bf1f3c1797f6fd3d323cf97023497d30d596f1

Patterson Companies Inc (PDCO)

Financials