Patterson Companies, Inc. (NASDAQ:PDCO) Q1 2024 Earnings Call Transcript

Kevin Barry: A.J., yes, it is. I mean we see typically within our dental business, our consumables margins and our value-added services margins, gross margins are higher than our equipment gross margins. Now they’re somewhat interrelated, I’d say, because when we look at equipment, we also think about all the services that we provide with regard to the equipment that actually shows up on our value-added services. So in a quarter where we have slightly lower equipment sales that quarter, we might see a little bit of a mix benefit. But we know in our model, it accrues to mix benefits going forward when we sell a lot of equipment because we get the failure add services. We get the technical service revenue from that relationship.

A.J. Rice: Okay. The company continues to put in its press release, the non to uncertain macro backdrop and some inflationary pressures we’ve talked on the call already about inflation impact or deflation impact in our infection control. And you’ve said you don’t think you’re seeing any impact on the equipment sales. Are you just making those statements to sort of keep a cautionary tone on things? Or is there any place that hasn’t come up where those two dynamics, uncertain macroeconomic and inflationaries or pressures you are having an impact now that you would want to call out?

Don Zurbay: No. I think we’re putting that out there as just sort of a caution that kind of that these forces are out there and we have a lot of ways that we’re looking at whether those are impacting our business and looking forward, do we think they’re going to, and we’re not seeing that. I think, again, I go back to — I’ve been out in the field, I’ve been with our top salespeople recently. And I’d just tell you that the momentum in the business right now, the optimism momentum are extremely high and they’re just not seeing it. So we’ll continue to monitor it. And I think we want to put that out there just so — I mean, not that people don’t, but so people keep that in mind, but it’s not showing up.

A.J. Rice: It sounds like — to an earlier question, when you think about the outlaying out the rest of the year, it doesn’t sound like you’re taking — you’re making any adjustments that things get tougher in any particular area, because of these factors late in the year. I just want to confirm that the variation that would be there is more, because of the year-to-year comps, et cetera, not so much because you’re making an assumption about the macro environment changing. Is that right?

Kevin Barry: That’s right. Absolutely.

A.J. Rice: Alright. Thanks a lot.

Operator: And your next question comes from the line of Allen Lutz from Bank of America. Your line is open.

Allen Lutz: Thanks for taking the questions. I wanted to follow-up on Jeff’s question from earlier. So over the past six months, equipment sales have been about 8%, and that’s higher than what it’s been over the past eight quarters. And so as we think about what we’ve seen so far on interest rates, you’ve said there’s been a marginal impact. As you think about the guide for the remaining three quarters of the year, is there any expected incremental impact from higher interest rates? And then kind of more thematically in longer term, is there any way to think about how dentists react if interest rates stay higher for maybe a few quarters? Thanks.

Don Zurbay: Well, I would say, first, the concept of any kind of marginal impact on the equivalent business, given interest rates is something that we spent a lot of time modeling is all really built into our guidance. So I think it would — unless there’s a fairly dramatic change there that we built some of that into our guidance and that’s there. What was the second part of the question?