Patterson Companies, Inc. (NASDAQ:PDCO) Q2 2024 Earnings Call Transcript

Jeff Johnson: And then, I guess, just one follow-up just on the Schein question, the tailwinds, given their cyber issues. The 2 million number you cited, Don, for the back two quarters for the last two weeks of October, that’s a number, frankly, that’s in line, maybe even a little lower than I’m hearing from some of the private dealers that are out there that are probably 4, 5, 6 times smaller than you. So that number just sounds very low to me. One, how do you get to that number? I’m sure it’s hard to tell what customers may be are incremental or coming to you because of Schein cyber issues. But then how do we think about maybe the third quarter impact where obviously, those Schein issues have continued for several weeks into the quarter.

I’m sure you don’t wish ill on any of your competitors, but it is an issue that obviously we’re watching closely. So how do we think about maybe the third quarter contribution from some of those share gains that might have happened on a temporary or we’ll see longer term basis?

Don Zurbay: Yes, I would reiterate what you just said. I never wish [Technical Difficulty] on any one particular competitor. I mean this does not benefit anyone really. But there was two weeks left in the quarter when this really just started to come to light. And so again — so for us, I would kind of point people to the idea that it’s not linear to get started. There’s a lot to that to get people into your full to start their ordering, to make sure that your own customers are serviced appropriately. And again, the other thing I’d say, frankly, is we compete vigorously for our — to obtain business, but so do our competitors, including that competitor. And so they were working to keep their customers. So that’s how you kind of look at that.

I would say we’re not going to, unfortunately, be able to give too much color on November and we’re actually — we just finished the November month. So we’re in the process of closing and starting to mine out all of that information. I would say that I think we have a pretty good process to get at a number that has some precision to it. So I feel good about the 2 million number that we gave for the quarter. As you get into November, we’ll see how that’s played out. The thing that November had that October didn’t is that some of the initial setup, some of the things that just sort of reacting to what happened was behind us, and we were able to focus a little bit more on just trying to help those customers out.

Operator: Our next question comes from the line of Kevin Caliendo with UBS.

Kevin Caliendo: I want to get back to the Dental equipment stuff and talk a little bit about selling price versus delays in ordering and to account for how much is actual price — average price declines versus decision making, and if you think those decisions are being delayed or just canceled. Meaning like are we waiting, are we waiting for December or are we pushing everything out a year? Or are these just like this isn’t the right time, come back to us next year or maybe would they expect prices to come down? I’m just trying to understand the behavior of what’s happening in the market.

Kevin Barry: I think it’s tough to make one blanket statement with kind of all the purchasing decisions that are out there in the market. I think what we’re seeing in our business is sort of a combination of — just when we look at the data, we do see some — here in the quarter, we saw some unit price declines in our CAD/CAM business. We saw a bit more of a mix of trade ups as opposed to new unit sales. And then in the, I guess, the imaging categories, we are seeing average selling prices come down a bit. And I think as we put all that together and we’ve built our forecast, there’s always a replacement cycle on these types of equipment. For a practitioner at a certain point, they just need to replace the piece of equipment, that’s how it’s kind of baked into the baseline of our business.

And like I said earlier, our teams are working on the right promotional activities to drive new demand over and above that as we go through the quarter to try to break through some of those purchasing headwinds we’re seeing. And like I said, some of that might show up in financing promotions, other promotions that we would do. Now from a timing standpoint, does that manifest in the next two months, six months, one year, kind of depends customer by customer what their individual affiliation is. What buoys us a bit is as we looked and as our results have come in, and we’ve been talking about the consumables business and even when we kind of strip out some of the market noise, we still see really good underlying patient demand for kind of the core hygiene restoration-type treatments that’s kind of our bread and butter for our business.