Don Zurbay: Yeah. Well, on the first question, I think, yeah, we’re taking a very disciplined approach in this area. I think when you’re dealing with the margin profile there, we have a disciplined way of looking at profitability by customer and a lot of data. And you’re right, for us, it’s been important to take that disciplined approach to the customers and profitability and make sure that we’re serving the customers that value are our proposition and that we feel like we can earn that profitability with. Your question on, we did mention that last quarter. It’s a continuing dynamic this quarter. I’m not sure we’re going to completely lap it in the next two quarters. This has actually been going on for some time and we’ll see how the industry evolves that — you could probably think about it as lapping in two quarters, but there could be some holdover.
I just think, it really proves our approach here on all three businesses, but particularly as you look at the Animal Health businesses and their margin profile. This is an extremely important initiative for us. Yeah, there — there’s some innovative products coming. We’re excited about it. So, without going into maybe details on exactly all the things that are there, we have some good plans for the companion business.
Kevin Barry: Maybe the one thing I’ll add, Jon, is just, as we have planned for and expect kind of the topline performance we’ve seen in the companion business. But that team’s done a good job of holding the business model to the margin profile. They’re expanding the way we expect. So to build on Don’s point, I think, we’re doing this in a planful disciplined way.
Don Zurbay: Yeah. And I think, one thing you could — we mentioned in the call, but you could look at the RSVP and ACT transaction as an example here, where it’s not only innovative products that are coming, but we’re looking to expand our service offerings as well into higher margin, more sustainable EBITDA streams.
Jon Block: Got it. Thanks for the color, guys.
Operator: Your next question comes from the line of Jason Bednar with Piper Sandler. Please go ahead.
Jason Bednar: Yeah. Hey. Good morning. I want to build a bit on some of the questions that have been already asked here this morning. But maybe starting first with margins. I know the Dental Equipment performance here in the quarter probably doesn’t help a whole lot, but the other side of the business and consumables was pretty strong as you called out. You talked about your share gain. That’s traditionally a higher margin business and that growth that you got in the quarter should be enough to give you leverage. So I guess my question is, why didn’t it come through in a better way or a bigger way? And can you help maybe with what margins would have been if not for some of those distribution and software investments that you were making that weighed on profitability in the quarter?
Kevin Barry: Yeah. Jason, I think, what I point to is, within the quarter, we did see our gross margins expand for the company. And so while there are some puts and takes from a mixed standpoint, like you point out within our business, gross margin, you’re right, gross margin, consumables mixes favorable in the Dental business, but also, candidly, the Production Animal Health business to lose that a bit. So, but net-net, we did grow our gross margins in the quarter. And the issue from an operating margin standpoint was on the expense line. And to your point, you’re right, we talked a little bit in Q2 about how, we are making some investments in the business and we expected our expense burden here in Q3 to be a bit higher and normalize here as we go into Q4.
And that really does relate to the kind of those distribution facilities coming online here earlier in the quarter, as well as the ongoing investments we are making in our software capabilities. I don’t know, I don’t quite have a basis point to give you in terms of you strip all that out with what’s normalized. I think we — as we go away, we’ll tell you, I think, is going into Q4 here and beyond, we’re obviously very focused on leveraging our operating expenses and getting that back in line so that, we do see that as a tailwind to the op margin performance of the company.
Don Zurbay: Yeah. Jason, I mean, I would just add one thing. I mean, our — just at a macro level, our P&L margin initiatives also, a big part of that is really just built on leveraging sales growth. So, when you look overall at the business, our sales growth was 4% in the first quarter and the last two quarters has lagged behind a bit just because of the equipment dynamics. So that makes the leveraging story more difficult, but as we move forward and get that growth rate back in line, I think you’ll see the results of that.
Jason Bednar: Okay. Maybe one follow-up and then another question. Just what should we expect in terms of maybe the spend that comes out that was maybe elevated the last quarter to fiscal second quarter and third quarter that comes out as we go forward into the fourth quarter and think about 2025 numbers? And then shifting over to Animal Health, your next year of comps are easier. But I guess what I’m curious about here is whether you have visibility on that companion business turning the corner. Is your visibility on patient traffic getting better? Are there some branded products that are turning generic that might be an opportunity for you? Can you help us with whether there’s any shift in direct versus agency at the turn of the calendar year that we should be aware of as we model out the upcoming quarters?
