Patterson Companies, Inc. (NASDAQ:PDCO) Q2 2023 Earnings Call Transcript

Nathan Rich: Good morning. Thanks for the questions. I guess, looking at the dental consumables growth of 1%, excluding PPE, can you maybe talk about how that breaks down between volume and price? And then, Don, I think last quarter, you’d pointed to slowing traffic and spend per visit as a risk to the dental end market. Just curious to get your updated thoughts on how that progress are played out during the quarter?

Don Zurbay: Sorry, what was the — just can you reiterate the last question?

Nathan Rich: Yes. Yes, I think on your last quarterly call, you had talked about the potential for slowing traffic and spend per visit at the dental practice. Just curious to get your updated thoughts there?

Don Zurbay: Well, maybe we’ll start there, and then see if Kevin has some if he wants to give on PP. I think, right now we’re viewing patient traffic in the Dental business as steady or stable. I mean, that’s the way I would look at it. And in terms of spend per visit, I’d probably say the same thing. I think we’re really just seeing a pretty stable environment right now in that part of the business.

Kevin Barry: Yes, and to your question about price and mix, we have had some inflation in the — our cost that in the non-PPE area, I wouldn’t describe it as significant, certainly not as high as what you see in some of the headline inflation numbers, but it’s there. So that certainly is built into our sales growth this quarter. But like Don said, when we look at the end markets and what our customers are seeing in their practices, we see a pretty stable market for demand in the Dental business.

Nathan Rich: Okay, great. And then if I could just ask on the dental equipment side. I think in the prepared remarks, you talked about improved demand for digital equipment. Could you maybe dig into a little bit more detail there? And I guess I was maybe — does that mean, I guess digital equipment kind of outpaced that 11% overall dental equipment growth? I guess, I’d be a little bit surprised if given some of the commentary around pricing pressure we’ve seen in that category. So could you maybe just unpack that a little bit further for us?

Don Zurbay: Yes, I mean, it’s a 3-month period. So, we try to look at this over a longer period of time, but we had a — we feel like that was an excellent part of the print here for us today. And so, it did outpace the rest of the equipment growth. I think, CAD/CAM was down as we mentioned. Digital was up. I think what it really points to is just the resiliency of our full equipment portfolio. I think we feel like we have a competitive advantage here. We have a particular skill in this area. And this is what we’ve seen really several times here is, some categories are up, some are down each quarter. It just kind of depends on timing. I think the main data point from my perspective is when you look at the last eight quarters, we’re up 14%. And, again, that’s a time period that we can get our arms around and say we think that we’re executing in this area at a really high-level.

Nathan Rich: Thank you.

Operator: Your next question comes from the line of Jeff Johnson from Baird. Your line is open.

Jeffrey Johnson: Thank you. Good morning, guys. I missed the first part of the call. So I don’t want to ask anything you might have already covered. But let me just ask, I guess one higher level question and, Don, met on the makeup of the business, you’ve had some changes at the dental leadership level recently, I think at least one outsider who had probably advocated for some bigger changes recently left. So we know the Board has long been a pretty conservative Board. So I guess, Don, now that you’re in the CEO chair, where do you sit between maybe that conservative Board and maybe tacking the things like private label self manufacturing of dental products, dental outside of North America, just kind of those bigger picture issues that could maybe move the sales force away from kind of that transactional approach that’s long been there, and more maybe do a consultative approach and into some of these kinds of newer areas of dental? Thanks.

Don Zurbay: Yes, Jeff, I won’t comment on the Board. But I mean, we — I think if you look at our strategy that we’ve had for the last couple of years, obviously, I was a big part of that along with the rest of the leadership team. So I don’t expect that to change significantly. I think that even though it may have not have shown up yet, as I mentioned, we’ve been I think aggressive in terms of looking at the other kinds of opportunities, the M&A opportunities, other ways to enhance our strategy. And my view, and I don’t think this is different than where we’ve been, but I want to be aggressive in both the Dental and Animal Health space in really deepening our value proposition. We know how to pick pack and ship. But we’re on the search and continuing journey to continue to deepen that.