Q4 2024 Patterson Companies Inc Earnings Call

Operator: Thank you for standing by, and welcome to the Patterson Company's 4th Quarter Fiscal 2020 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the Patterson companies fourth quarter fiscal 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. I'd now like to turn the call over to John Wright, Vice President of Investor Relations. Thank you, operator. Good morning, everyone.

If you would like to withdraw your question again prestige starwood.

Thank you I'd now like to turn the call over to John Wright, Vice President of Investor Relations you may begin.

John M. Wright: And thank you for participating in Patterson Companies' fiscal 2024 fourth quarter and full year conference call. Joining me today are Patterson President and Chief Executive Officer Don Zurbay and Patterson Chief Financial Officer Kevin Barry. After a review of our results and outlook by management, we will open the call to your questions. Before we begin, let me remind you that certain comments made during this conference call are forward-looking in nature and subject to certain risks and uncertain circumstances. These factors, which could cause actual results to materially differ from those indicated in such forward-looking statements, are discussed in detail in our Form 10-K and our other filings with the Securities and Exchange Commission.

Speaker Change: Thank you operator, good morning, everyone and thank you for participating in Patterson companies fiscal 2020 for fourth quarter and full year conference call joined.

John M. Wright: Joining me today are Patterson, President and Chief Executive Officer, Don Survey, and Patterson, Chief Financial Officer, Kevin Berry.

John M. Wright: A review of our results and outlook by management, we will open the call to your questions.

John M. Wright: We encourage you to review this material. In addition, comments about the markets we serve, including growth rates and market shares, are based on the company's internal analysis and estimates. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, June 18, 2024. Patterson undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Speaker Change: Before we begin let me remind you that certain comments made during this conference call are forward looking in nature and subject to certain risks and uncertainties.

Speaker Change: These factors, which could cause actual results to materially differ from those indicated in such forward looking statements are discussed in detail in our Form 10-K, and our other filings with the Securities and Exchange Commission.

Speaker Change: We encourage you to review this material.

Speaker Change: In addition comments about the markets, we serve including growth rates and market shares are based upon the company's internal analysis and estimates.

Speaker Change: The content of this conference call contains time sensitive information that is accurately accurate only as of the date of the live broadcast June 18th 2024.

Speaker Change: Anderson undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.

John M. Wright: Also, a financial slide presentation can be found in the investor relations section of our website at pattersoncompanies.com. Please note that in this morning's conference call, we will reference our adjusted results for the fourth quarter and full year, fiscal 2024. The reconciliation tables in our press release are provided to adjust various reported gap measures for the impact of deal amortization and an interest rate swap, along with any related tax effect of these items.

Speaker Change: Also a financial slide presentation can be found in the Investor Relations section of our website at Patterson companies Dot com.

Speaker Change: Please note that in this mornings conference call, we will reference our adjusted results for the fourth quarter and full year fiscal 2020 for the.

Speaker Change: A reconciliation tables in our press release are providing to adjust various reported GAAP measures for the impact of deal amortization and an interest rate swap along with any.

Speaker Change: The related tax effect of these items.

Speaker Change: We will also discuss free cash flow as defined in our earnings release, which is a non-GAAP measure.

Speaker Change: We use the term internal sales to represent net sales adjusted to exclude the impact of foreign currency contributions from recent acquisitions and the net impact of an interest rate swap.

Speaker Change: non-GAAP measures are not intended to be a substitute for our GAAP results.

John M. Wright: We will also discuss free cash flow as defined in our earnings, which is a non-GAAP measure, and use the term internal sales to represent net sales adjusted to exclude the impact of foreign currency, contributions from recent acquisitions, and the net impact of an interest rate swap. These non-GAAP measures are not intended to be a substitute for our GAAP results. This call is being recorded and will be available for replay starting today at 10 a.m. Central Time for a period of one week.

Speaker Change: This call is being recorded and will be available for replay starting today at 10 am central time for a period of one week now.

Speaker Change: Now I'd like to hand, the call over to Don Survey.

Donald J. Zurbay: Now I'd like to hand the call over to Don Zurbay. Thanks, John, and welcome everyone to Patterson's fiscal 2024 fourth quarter and full year conference call. On today's call, we'll provide an update on the considerable progress we've made on our core strategic objectives throughout the fiscal year before discussing the financial performance of our dental and animal health businesses. I'd like to start with a few key takeaways.

Thanks, John and welcome everyone to Patterson's fiscal 2020 for fourth quarter and full year conference call.

Don Survey: On today's call, we'll provide an update on the considerable progress we've made on our core strategic objectives throughout the fiscal year before discussing the financial performance of our dental and animal health segments.

Speaker Change: Well I'd like to start with a few key takeaways on.

Donald J. Zurbay: On the top line, we finished fiscal 2024 with internal sales growth of approximately 1%. For both the fourth quarter and full year, our sales performance was highlighted by strong growth in both dental consumables and production animals. Our fourth quarter was negatively impacted by the widely reported cyber security attack on our claims processing vendor, Change Healthcare, which resulted in many dental practices being unable to utilize their services for insurance claim processing. Financial impact of Patterson is seen within the value-added services category of our dental segment, as many of our practice management softwares incorporated a fee-based integration with Change Healthcare for claims management. During the outage, Patterson suspended charging for that service, resulting in a four cent impact on both our gap and adjusted EPS in the fourth quarter.

Speaker Change: On the topline we finished fiscal 2024 with internal sales growth of approximately 1%.

Operator: Center for both a fourth quarter and full year. Our sales performance was highlighted by strong growth in both dental consumables and production animals. Our fourth quarter was negatively impacted by the widely recorded cybersecurity attack on our claims processing vendor Change Healthcare, which resulted in many dental practices being unable to utilize their services for insurance claim processing. The financial impact of Patterson is seen within the value out of services category for dental segment. As many of our practice management software solutions incorporated, they feed-based integration with Change Healthcare for claims management. During the outage, Patterson suspended charging for that service, resulting in a four-cent impact to both our gap and adjusted EPS in the fourth quarter.

Speaker Change: Both the fourth quarter and full year, our sales performance was highlighted by strong growth in both dental consumables and production animal.

Our fourth quarter was negatively impacted by the widely reported cyber security attack.

Speaker Change: On our claims processing ponder change healthcare, which resulted in many dental practices being unable to utilize their services for insurance claims process.

Speaker Change: The financial impact of Patterson Sema from value added services category for our dental segment.

Speaker Change: As many of our practice management software solutions, incorporating a fee based integration with change healthcare for claims management.

Speaker Change: During the outage patterson's suspended charging for that service, resulting in a four cent impact to both our GAAP and adjusted EPS in the fourth quarter.

Donald J. Zurbay: Excluding the impact of Change Healthcare's cyber security attack, our underlying fourth quarter EPS would have exceeded last year, and our full year EPS performance would have landed at the high end of the guidance range we provided last quarter. Ultimately, we delivered adjusted EPS of $0.82 in the fourth quarter and $2.30 for the full fiscal year, reflecting our top-line performance along with ongoing cost discipline measures, balanced against the continued strategic investments Patterson is making across its business to further enhance our capabilities and profitability. Finally, our performance during fiscal 2024 allowed us to return approximately $328 million to shareholders through dividends and share repurchase, in alignment with our balanced capital allocation priorities.

Kevin Caliendo: Excluding the impact from Change Healthcare's cybersecurity attack, our underlying fourth quarter EPS would have exceeded last year, and our full year EPS performance would have landed at the high end of the guidance range we provided last quarter. Ultimately, we delivered an adjusted EPS of 82 cents in the fourth quarter and $2.30 for the fourth fiscal year, reflecting our top line performance along with ongoing cost discipline measures. Balance against the continued strategic investments Patterson is making across our businesses to further enhance our capabilities and profitability. Finally, our performance during fiscal 2024 allowed us to return approximately $328 million to shareholders through dividends and share purchases in alignment with our balance capital allocation priorities.

Speaker Change: Excluding the impact from change healthcare cyber security attacks.

Speaker Change: Our underlying fourth quarter EPS would have exceeded last year and our full year EPS performance would have landed at the high end of the guidance range, we provided last quarter.

Speaker Change: Ultimately, we delivered adjusted EPS of 82 tons in the fourth quarter and $2 31 for the full fiscal year.

Speaker Change: Reflecting our top line performance along with ongoing cost discipline measures balanced against the continued strategic investments Patterson is making across our businesses to further enhance our capabilities and profitability.

Speaker Change: Finally, our performance during fiscal 2024 allowed us to return approximately $328 million to shareholders through dividends and share repurchases and alignment with our balanced capital allocation priorities.

Donald J. Zurbay: We are encouraged by our performance in a dynamic and evolving macro environment marked by persistent inflation, elevated interest rates, and uncertainty. Our continued ability to advance our strategic objectives while delivering value to our customers and shareholders speaks to the strength of our team and competitive position, as well as the attractive and resilient end markets we serve. What I'm most proud of over the past year are the many steps we've taken to better position Patterson for the future.

Speaker Change: We are encouraged by our performance through the dynamic and evolving macro environment.

Kevin Caliendo: We are encouraged by our performance through the dynamic and evolving macro environment, marked by persistent inflation, elevated interest rates, and uncertainty. A continued ability to advance our strategic objectives while delivering value to our customers and shareholders speaks of the strength of our team and competitive position, as well as the attractive and resilient markets we serve. What I'm most proud of over the past year are the many steps we've taken to better position Patterson for the future.

Speaker Change: Marked by persistent inflation elevated interest rates and uncertainty.

Speaker Change: Our continued ability to advance our strategic objectives, while delivering value to our customers and shareholders.

Speaker Change: Thanks to the strength of our team and competitive positioning as well as the attractive and resilient end markets we serve.

Speaker Change: What I'm most proud of over the past year. The many steps we've taken to better position Patterson for the future.

Donald J. Zurbay: As a reminder, our long-term strategy is designed to achieve four core objectives: first, drive revenue growth above the current end market growth rate; second, build upon the progress we've made to enhance our margin performance. Third, evolve our products, channels, and services to best serve the customers in our end market, and fourth, improve efficiency and optimization. We entered this fiscal year laser-focused on those objectives with an emphasis on expanding investment and strategic growth opportunities like software and value-added services, in response to growing demand among our customers and vendors for tightly integrated software, technology, and actionable data and insights to drive growth and profitability, and to compete more effectively. For Patterson, investing in these capabilities advances these strategic objectives.

Kevin Caliendo: As a reminder, our long-term strategy is designed to achieve four core objectives. First, drive revenue growth above the current and market growth rates. Second, we'll depend upon the progress we've made to enhance our margin performance. Third, we've all our products, channels, and services to best serve the customers in our end markets, and fourth, improve efficiency and optimization. We entered this fiscal year a laser focused on those objectives with an emphasis on expanding investment in strategic growth opportunities like software and value added services. In response to growing demand among our customers and vendors for tightly integrated software technology and actionable data and insights to drive growth and profitability to compete more effectively.

Speaker Change: As a reminder, our long term strategy is designed to achieve four core objectives.

First drive revenue growth above the current end market growth rates.

Speaker Change: Second build upon the progress we've made to enhance our margin performance.

Speaker Change: Third if all of our products channels and services to best serve the customers in our end markets.

Speaker Change: Fourth improve efficiency and optimization.

Donald J. Zurbay: Adding margin-enhancing software and services to our business and deepening the value proposition we bring to our customers. Our investments in fiscal 2024 yielded meaningful progress in our software and value-added service offerings across both our dental and animal health segments. For example, we recently introduced Patterson CarePay+, a new all-in-one patient financing, dental insurance, and payment solution available to new and existing EgoSoft customers. Patterson CarePay Plus provides alternative payment options to patients for care, enabling increased patient retention and streamlined practice operations for our dental customers.

Speaker Change: We entered this fiscal year, we're laser focused on those objectives.

Speaker Change: This is an expanding investment in strategic growth opportunities like software and value added services.

Speaker Change: Response to growing demand among our customers and vendors for tightly integrated software.

Speaker Change: Technology, and actionable data and insights to drive growth and profitability.

Compete more effectively.

Kevin Caliendo: Patterson investing in the capabilities advances these strategic objectives. At a margin enhancing software and services to our business in deepening value proposition to bring to our customers. Our investments in fiscal 2024 yielded the meaningful progress in our software, the desire to service offerings across both our dental and our health sector. For example, we recently introduced Patterson Care Pay Plus, a new all-in-one patient financing, dental insurance, and payment solution available to new and existing use-off customers. Patterson Care Pay Plus provides alternative payment options to patients for care, enabling increased patient retention and streamlined practice operations for adult customers.

Speaker Change: For Patterson investing in these capabilities advances these strategic objectives, adding margin enhancing software and services to our business and deepening the value proposition, we bring to our customers.

Speaker Change: Our investments in fiscal 2024 yielded meaningful progress in our software and service offerings across both our dental and animal health segments.

Speaker Change: For example, we recently introduced Patterson <unk> costs.

Speaker Change: Our new all in one patient financing dental insurance and payment solutions available to new and existing Eagle soft customers.

Speaker Change: Patterson care paid plus provides alternative payment options to patients for care, enabling increased patient retention and streamlined practice operations for our dental customers.

Kevin Caliendo: Another investment we will major in the year occurred during the food court, when we announced an agreement with Pearl, a leading AI solution provider for the dental business, to integrate a pathology detection feature set called Second Opinion into Patterson's Eagle Soft Practice Management software. Second Opinion uses AI to help dentists detect conditions commonly diagnosed in x-rays, and when hands productivity and improved clinical outcomes for dental customers. We exemplifying how Patterson continues to offer solutions to the transformed practice performance. On the animal health side, we invested in Turnkey, a market leading enterprise resource planning system for cattle producers throughout the fiscal year.

Donald J. Zurbay: Another investment we made during the year occurred during the third quarter when we announced an agreement with Pearl, a leading AI solution provider for the dental industry, to integrate a pathology detection feature set called Second Opinion into Patterson's EgoSoft practice management software. Second Opinion uses AI to help dentists detect conditions commonly diagnosed in x-rays and will enhance productivity and improve clinical outcomes for a dental customer, exemplifying how Patterson continues to offer solutions to transform practice performance.

Speaker Change: Another investment we made during the year occurred during the third quarter, when we announced an agreement with Pearl leading AI solution provider for the dental business to integrated pathology detection feature set called second opinion into Patterson's equal soft practice management software.

Speaker Change: Second opinion uses AI to help Texas detect conditions, commonly diagnosed and X rays and will enhance productivity and improve clinical outcomes for our dental customers.

Speaker Change: Exemplifying how Patterson continues to offer solutions that transform practice performance.

Donald J. Zurbay: On the animal health side, we invested in Turnkey, a market-leading enterprise resource planning system for cattle, throughout the fiscal year. The Currency Platform is an integral platform for producer-customers who view their business as highly tech-enabled. In fact, the majority of US cattle on automatic feed systems are managed by Patterson's Turnkey platform.

Speaker Change: On the animal health side, we invested in turnkey our market, leading enterprise resource planning system for cattle producers throughout the fiscal year.

Kevin Caliendo: The turnkey platform is an integral platform for producer customers. We view their business as highly tech enabled. The fact that majority of U.S. cattle and automatic feed systems are managed by Patterson's turnkey platform. The recently launched turnkey insights platform, meaningfully advances turnkey beyond tracking to a tool that supports better business decision making. Turnkey Insights enables customers to view and leverage historical data analysis and actionable insights about their feed yards, bridging operational and financial data through a customizable dashboard and a cloud-based mobile app. We also added to our animal health software portfolio through relationship with Weed, a leading client engaged in platform for veterinary practices.

Speaker Change: The turnkey platform as an integral platform for our producer customers. We view their business is highly tech enabled.

Speaker Change: The majority of U S cattle and automatic feed systems are managed by Patterson's turnkey platform.

Donald J. Zurbay: A recently launched Chernky Insights platform meaningfully advances Chernky beyond tracking to a tool that supports better business decision-making. Turnkey Insights enables customers to view and leverage historical data analysis and actionable insights about their feed yards, bridging operational and financial data through a customizable dashboard in a cloud-based mobile app. We also added to our animal health software portfolio through a relationship with Weave, a leading client engagement platform for veterinary practices. Weave's suite of automated tools for marketing, scheduling, reminders, payments, and analytics will integrate seamlessly with our veterinary practice management.

Speaker Change: Our recently launched turnkey insights platform, meaning meaningfully advances turnkey beyond tracking to a tool that supports better business decision, making.

Speaker Change: Turnkey insights enables customers to view leverage historical data analysis, and actionable insights about their feed yards, reaching operational and financial data through a customizable dashboard and the cloud based mobile app.

Speaker Change: We also added to our animal health software portfolio are through our relationship with we've a leading client engagement platform for veterinary practices.

Kevin Caliendo: We sweeten automated tools for marketing, scheduling reminders, payments, and analytics will integrate seamlessly with our veterinary practice management systems. Unlocking powerful capabilities, streamlined workflows, and elevate the client experience that our veterinary customer customers clinics. These investments demonstrate our commitment to delivering cutting-edge technology to meet the evolving needs of our customers and long-term growth opportunity for Patterson in this important arena. Fiscal 2024 was a notable year of investing in these types of solutions. From our focus on enhancing Patterson's leading speed of software solutions remains ongoing. We are confident that these investments will provide appreciable value over time.

Speaker Change: We have suite of automated tools for marketing scheduling reminders, Siemens and analytics will integrate seamlessly with our veterinary practice management systems.

Speaker Change: Unlocking powerful capabilities to streamline workflows.

Donald J. Zurbay: Unlocking powerful capabilities to streamline workflows and Elevate the Client Experience at our Veterinary Customers Clinic. These investments demonstrate our commitment to delivering cutting-edge technology to meet the evolving needs of our customers and long-term growth opportunities for Patterson in this important arena. Fiscal 2024 was a notable year of investment in these types of solutions. And while our focus on enhancing Patterson's leading suite of software solutions remains ongoing, we are confident that these investments will provide appreciable value over time.

Speaker Change: And to elevate the client experience and our veterinary customers customers clinics.

These investments demonstrate our commitment to delivering cutting edge technology to meet the evolving needs of our customers and long term growth opportunity for Patterson and this important arena.

Speaker Change: Fiscal 2024 was a notable year of investment in these types of solutions.

Speaker Change: More focus on enhancing Patterson's, leading suite of software solutions remains ongoing we are confident that these investments will provide appreciable value over time.

Donald J. Zurbay: Looking ahead to fiscal 2025, our focus will remain on our core strategic objectives and on investments in our businesses that will deliver long-term growth, in addition to our software and value-added services capability. Our acquisitions of DairyTek and RSVP and ACT provide a roadmap for value-enhancing M&A that we will continue to pursue. Both of these businesses continue to outperform our internal expectations and create a track record of success integrating and enhancing acquired businesses in line with our strategy. And, of course, balancing our investments. We remain committed to managing the organization with a keen focus on cost.

Speaker Change: Looking ahead to fiscal 2025, our focus will remain on our core strategic objectives, and our investments in our businesses that will deliver long term growth and.

Kevin Caliendo: Looking ahead to Fiscal 2025, our focus will remain on our course, strategic objectives, and our investments in our businesses that will deliver long-term growth. In addition to our software and value added services capabilities, our acquisitions of dairy tech and RSVP and ACT provide a roadmap for value-enhancing community and we will continue to pursue. Both of these businesses continue to perform our internal expectations, including a track record of the success integrating and enhancing acquired businesses in line with our strategy. The course down to our investment. You're in committed to managing the organization that the key to focus on cost to support.

Speaker Change: In addition to our software and value added services capabilities are.

Speaker Change: Our acquisitions of dairy Tac and RSVP in ECT provide a roadmap for value enhancing M&A and we will continue to pursue.

Speaker Change: Both of these businesses continue to outperform our internal expectations and create a track record of success integrating and enhancing acquired businesses in line with our strategy.

Speaker Change: And of course balancing our investments.

Speaker Change: Remain committed to managing the organization with a keen focus on cost discipline.

The adjusted earnings guidance range of $2 33 to $2 43 per diluted share.

Kevin Caliendo: The adjusted earned guidance range of $2.33 to $2.443 per the lead chair. Do we initiate it today, or reflect the continued confidence in our strategy? Focus on investment to drive enhanced growth and profitability over the long term, combined with the current conditions and the markets that we expect to continue in fiscal 2025.

Donald J. Zurbay: The adjusted earnings guidance range of $2.33 to $2.43 per diluted share that we initiated today reflects the continued confidence in our strategy, focused on investing to drive enhanced growth and profitability over the long term, combined with the current conditions and the markets that we expect to continue in fiscal 2025. Now, I'll provide more details on the financial performance in each of our two business segments during the fiscal 2024 fourth quarter. Let's start with dental.

Speaker Change: We initiated today reflects the continued confidence in our strategy.

Speaker Change: Focus on investing to drive enhanced growth and profitability over the long term.

Speaker Change: Combined with the current conditions in our end markets, we expect to continue in fiscal 2025.

Donald J. Zurbay: Dental internal sales declined about 4% in the fourth quarter driven by the expected moderation in dental equipment, and the unexpected impact of the changed healthcare cybersecurity attack on our value-added service partially offset by strong performance in our consumer. Our consumables portfolio delivered nearly 4% growth year-over-year in the fourth quarter and nearly 4.5% for fiscal 2024. Excluding the deflationary impact of certain infection control products, our growth was even stronger, at nearly 6% for fiscal 2024.

Kevin Caliendo: Now, I'll provide more details on the financial performance in each of our two business segments during fiscal 2024, fourth quarter. Let's start with dental. In dental, internal failed declined about 4% in the fourth quarter driven by the expected moderation in dental equipment. An unexpected impact of the change health care cybersecurity attack to our value added service to the sales. Partly offset by strong performance in our consumers. The consumer's portfolio delivered nearly 4% growth year over year in the fourth quarter, and nearly 4.5% fiscal 2024. Excluding the deflationary impact of certain sections in full products, are growth would even stronger at nearly 6% fiscal 2024.

Speaker Change: Now I'll provide more details on our financial performance in each of our two business segments. During the fiscal 2020 for fourth quarter.

Speaker Change: Let's start with dental and.

Speaker Change: In dental internal sales declined about 4% in the fourth quarter driven by the expected moderation in dental equipment.

Speaker Change: Unexpected impact with the change healthcare cyber security attack to our value added services sales.

Speaker Change: Partially offset by strong performance in our consumables business.

Speaker Change: Our consumables portfolio delivered nearly 4% growth year over year in the fourth quarter and nearly four 5% for fiscal 2024.

Speaker Change: Excluding the deflationary impact of certain infection control products, our growth was even stronger at nearly 6% for fiscal 2024.

Donald J. Zurbay: A performance that encompasses the entire fiscal year reflects the resilience of our product portfolio in the dental market. And even more so, the strength of Patterson's relationships with our customers and the value of our comprehensive consumables offering, spanning both branded and private label products, both contribute to our ability to drive above market growth. Within our infection control product portfolio, we are still experiencing some deflationary impact for certain products but expect the year-over-year impact of that phenomenon to be negligible after the first quarter of fiscal 2025. Turning to dental equipment, internal sales decreased approximately 12% in the fourth quarter, as we continue to lap top prior year comparisons for the core equipment.

Kevin Caliendo: A performance which encompasses the entire fiscal year reflects the resilience of a product portfolio in the dental market. And even more so, the strength of patterns and relationships with our customers and the value of our comprehensive consumer's offer expanding both branded and private label products. Both contribute to our building drive of bulk market growth. Within our infection control product portfolio, we are still experiencing some deflationary impact for certain products. But expect the year-over-year impact of that phenomenon to be negligible after the first quarter of fiscal 2025. Turning to dental equipment, internal failed decreased approximately 12% in the fourth quarter.

Speaker Change: Our performance, which encompasses the entire fiscal year reflects the resilience of our product portfolio in the dental market and even more so the strength of patterson's relationships with our customers and the value of our comprehensive consumables offerings spanning both branded and private label products.

Both contribute to our ability to drive above market growth.

Speaker Change: Within our infection control product portfolio, we are still experiencing some deflationary impact for certain products.

Speaker Change: I would expect the year over year impact of that phenomenon to be negligible. After the first quarter of fiscal 2025.

Turning to dental equipment internal sales decreased approximately 12% in the fourth quarter as.

Kevin Caliendo: As we continue to lap top prior year comparisons for the core equipment. And Chad Camp category is in a challenging time. Economic cycle leading to moderation equipped with spending combined with the lack of product innovation. This challenging period for a dental equipment category does not change patterns with leading value proposition and dental equipment and technology. The market has long recognized rewarded patterns for our unique ability to support customers through the entire equipment life cycle. From financing and purchase to installation, training, maintenance, and repairs. In fourth quarter, we strengthen our relationship with Convergence Dental by becoming exclusive North American distributor of the Soleo laser.

Speaker Change: As we continue to lap tough prior year comparisons for the core equipment.

Donald J. Zurbay: CAD-CAM categories are in a challenging time in the economic cycle, leading to moderation and, combined with the lack of product innovation. This challenging period for our dental equipment category does not change Patterson's leading value proposition in dental equipment and technology. The market has long recognized and rewarded Patterson for its unique ability to support customers through the entire equipment life cycle, from financing and purchase to installation, training, maintenance, and repair. In the fourth quarter, we strengthened our relationship with Convergent Dental by becoming the exclusive North American distributor of the Soleil laser. The Cilia is the only CO2 laser cleared by the FDA for all tissue indications.

Speaker Change: Cadcam categories in a challenging time the economic.

Speaker Change: Economic cycle, leading to moderation equivalents combined with proactive lack of product innovation.

Speaker Change: This challenging period for our dental equipment category does not change Patterson, leading value proposition of dental equipment and technology.

Speaker Change: The market has long recognized and rewarded Patterson for our unique ability to support customers through the entire equipment lifecycle.

Speaker Change: From financing and purchase to installation training maintenance and repairs.

Fourth quarter, we strengthened our relationship with convergent dental I'd be telling the exclusive north American distributor of the soil laser.

Kevin Caliendo: The Soleo, the only CO2 laser cleared by the FDA for all tissue indications. This personal solution can benefit almost every dental patient. I'll think to address a range of common procedures in a way that is anesthesia-free, blood-free, and pain-free. Importantly, this novel technology enables dentists to elevate their practices through improved efficiency, patient experience, clinical effectiveness, and procedural expansion. Patterson of a proven track record of driving widespread adoption if we can take knowledge. We believe our exclusive arrangement with Convergence for this great in our ability to help dentists achieve better clinical outcomes, improve patient experiences, and drive growth for their practices.

Speaker Change: So we are the only C O two laser cleared by the FDA for all tissue indications.

Donald J. Zurbay: This versatile solution can benefit almost every dental patient, helping to address a range of common procedures in a way that is anesthesia-free, blood-free, and pain-free. Importantly, this novel technology enables dentists to elevate their practices through improved efficiency, patient experience, clinical effectiveness, and procedural expansion. Patterson has a proven track record of driving widespread adoption of leading technology. We believe our exclusive arrangement with Convergent will further strengthen our ability to help dentists achieve better clinical outcomes, improve patient experiences, and drive growth for their practices.

Speaker Change: This first of all solution can benefit almost every dental patient.

Speaker Change: To address a range of common procedures in a way that is anesthesia free flood free and pain free.

Speaker Change: Importantly, this novel technology.

Speaker Change: Enable dentists to elevate their practices through improved efficiency pace.

Speaker Change: <unk> experience clinical effectiveness and procedural expansion.

Speaker Change: Patterson has a proven track record in driving widespread adoption of leading technologies. We believe our exclusive arrangement with convergent further strengthen our ability to help them achieve better clinical outcomes improve patient experiences and.

Speaker Change: Drive growth for their practices.

Donald J. Zurbay: Finally, as I mentioned earlier, internal sales in our dental value-added services category declined 11% in the fourth quarter compared to the prior year period, primarily due to the change in health care cybersecurity. Now, let's move on to our animal health section.

Kevin Caliendo: Finally, as I mentioned earlier, internal failed in a dental value out of services category, declined 11% in the fourth quarter compared to the prior year period primarily due to the change health care cybersecurity attack.

Speaker Change: Finally, as I mentioned earlier internal sales in our dental value added services category decline.

Speaker Change: Declined 11% in the fourth quarter compared to the prior year period.

Speaker Change: Period, primarily due to the change healthcare cyber security attack.

Kevin Caliendo: Now let's move on to our animal health segment. Internal sales in the animal health segment grew approximately 3% driven by strong performance in our production animal business. The animal health segment also achieved operating margin expansion, and both the fourth quarter and for the fullest fiscal year. Driven by our folks managing our sales mix and execution discipline, cost management, and commitment to driving business with customers and partners. The recognize and rewards for our value as approach to both our companion and production animal customers. A production animal business continued its strong momentum as internal sales grew high single digits in the fourth quarter of fiscal 2024.

Speaker Change: Now, let's move on to our animal health segment.

Donald J. Zurbay: Internal sales in the animal health segment grew at approximately 3% driven by strong performance in our production animals. The animal health segment also achieved operating margin expansion in both the fourth quarter and for the full fiscal year, driven by our focus on managing our sales, mix, and execution, discipline, cost management, and Commitment to Driving Business with Customers and Partners, to recognize and reward us for our value-added approach to both our companion and production animal businesses. Our production animal business continued its strong momentum as internal sales grew high single digits in the fourth quarter of fiscal 2024. We see our strong performance in production as continued validation of the strength and effectiveness of our omni-channel presence.

Speaker Change: Internal sales in the animal health segment grew approximately 3% driven by strong performance in our production animal business.

Speaker Change: The animal Health segment also achieved operating margin expansion in both the fourth quarter and for the full fiscal year driven by our focus on managing our sales mix and execution disciplined cost management and commitment to driving business with customers and partners.

Speaker Change: Recognize and reward us for our value added approach to both our companion and production animal customers.

Speaker Change: Our production animal business continued its strong momentum as internal sales grew high single digits in the fourth quarter of fiscal 2024.

Kevin Caliendo: We share a strong performance in production as continued validation of the strength and effectiveness of our onney channel presence. Highly tailored distribution strategy and comprehensive offering across animal species. Retains ability to execute these strategies and provide value-enhancing solutions tailored to our customer needs. Has enabled us to continue winning new business and outperform the broader production animal work. The companion animal internal sales in the fourth quarter declined by low single digits, driven in part by the moderation in veterinary clinic traffic. And our own strategic decisions and continued discipline to focus on more profitable business in ways that modestly reduced our top line growth while supporting margin expansion.

Speaker Change: We see our strong performance in production as continued validation of the strength and effectiveness of our Omnichannel presence.

Donald J. Zurbay: Isley Tailor Distribution Strategy and Comprehensive Offering Across Animal Species. The ability of our team to execute these strategies and provide value-enhancing solutions tailored to our customer needs has enabled us to continue winning new business and outperforming the broader production animal market. Companion animal internal sales in the fourth quarter declined by a low single digit, driven in part by the moderation in veterinary clinic traffic and our own strategic decisions and continued discipline to focus on more profitable business in We remain encouraged by the underlying markets and fundamentals and positive long-term trends in pet parenting and confident in the value proposition of our companion animal.

Speaker Change: Highly tailored distribution strategy and comprehensive offering across animal species.

Speaker Change: Our team's ability to execute these strategies and provide value enhancing solutions tailored to our customer needs.

Speaker Change: It has enabled us to continue winning new business and outperforming the broader production animal market.

Speaker Change: The companion animal internal sales in the fourth quarter declined by low single digits driven in part by the moderation in veterinary clinic traffic and our own strategic decisions and continued discipline to focus on more profitable business in ways that modestly reduced our top line growth while supporting margin expansion.

Kevin Caliendo: Your remaining curves by the underlying market fundamentals and positive long-term trends and pet parenting. The confidence value proposition of our and companion animal business going forward. We expect the companion animal market to continue to grow in the low single digits, and we are focused on aligning our value proposition with where pet owners are spending. Cross the annual off-second, the value of services category continued to be an area of strength, achieving double digit internal sales growth in the fourth quarter. As we look to fiscal 2025, we believe our animal health business is positioned for continued success in the dynamic and market.

Speaker Change: We remain encouraged by the underlying market fundamentals and positive long term trends in pet parenting.

Speaker Change: I'm confident in the value proposition of our companion animal business.

Donald J. Zurbay: Going forward, we expect the companion animal market to continue to grow in the low single digits, and we are focused on aligning our value proposition with where pet owners are spending. Across the MLL segment, the Value Added Services category continued to be an area of strength, achieving double-digit internal sales growth in the fourth quarter.

Speaker Change: Going forward, we expect the companion animal market to continue to grow in the low single digits and we are focused on aligning our value proposition with where pet owners are spending.

Speaker Change: Across the animal health segment value added services category continued to be an area of strength.

Speaker Change: Achieving double digit internal sales growth in the fourth quarter.

Kevin Barry: As we look to fiscal 2025, we believe our animal health business is positioned for continued success amid a dynamic end market. Now, I'll turn the call over to Kevin Barry to provide more details on our panel. Thank you, Don, and good morning, everyone.

Speaker Change: As we look to fiscal 2025, we believe our animal health business is positioned for continued success.

Speaker Change: Dynamic end market.

Speaker Change: Now I will turn the call over to Kevin Barry to provide more details on our financial results.

Kevin Caliendo: Now I'll turn the call ready to provide more details in our financial results. Thank you, Dan, and good morning everyone. In my prepared remarks, I will cover the financial results for the quarter of fiscal 24, which ended on April 27, 2024. As well as our full year results for fiscal 24. I will also discuss our fiscal 25 earnings guidance we issued this morning, along with several modeling assumptions related to the financial outlet for the next fiscal year. Consolidated reported sales for Peters and companies in our fiscal 24 fourth quarter for 1.72 billion dollars. An increase of 0.1% versus the fourth quarter one year.

Kevin Barry: Thank you Dan and good morning, everyone.

Kevin Barry: In my prepared remarks, I will cover the financial results for the fourth quarter of Fiscal 2015, which ended on April 27th, 2021, as well as our full year results. I will also discuss our Fiscal 25 Earnings Guide this morning, along with several modeling assumptions related to the financial outlook. Consolidated reported sales for Patterson companies in our fiscal 24 were $1.72 billion, an increase of 0.1% versus the fourth quarter one year in a row.

Kevin Barry: In my prepared remarks, I will cover the financial results for fourth quarter of fiscal 'twenty four.

Kevin Barry: I ended on April 27, 2024, as well as our full year results for fiscal 'twenty four.

Kevin Barry: I will also discuss our fiscal 'twenty five earnings guidance, we issued this morning, along with several modeling assumptions related to our financial outlook for the next fiscal year.

Kevin Barry: Internal sales for the fourth quarter of fiscal 24, which are adjusted for the effects of currency translation and the net impact, decreased 0.5% compared to the same period last month. For the full year of fiscal, consolidated reported sales for Patterson, decreased 0.5% compared to the same period last month.

Kevin Barry: Consolidated reported sales for Patterson companies in our fiscal 'twenty four fourth quarter from $1 $72 billion, an increase of zero <unk>, 1% versus the fourth quarter one year ago.

Kevin Caliendo: Here we go. Internal sales for the fourth quarter of Francisco 24, which are adjusted for the effects of currency translation and the net impact of an interest rate swap, decreased to 0.5% compared to the same period last fiscal year. For the full year of fiscal 24, consolidated reported sales for Patterson Companies, for $6.6 billion, an increase of 1.5% for the same period one year ago. Internal sales for fiscal 24, which are adjusted for the effects of currency translation and the net impact of an interest rate swap, increased 0.8% compared to fiscal 2023. Our fourth quarter fiscal 24, gross margin, was 21.5%, a decrease of 110 basis points compared to the prior year.

Kevin Barry: Internal sales for the fourth quarter of fiscal 'twenty, four which are adjusted for the effects of currency translation and the net impact of an interest rate swap decreased <unk>, 5% compared to the same period last fiscal year.

Kevin Barry: For the full year of fiscal 'twenty four consolidated reported sales for Patterson companies are $6 6 billion, an increase of one 5% versus the same period one year ago.

Kevin Barry: Internal Sales for Fiscal Year, which are adjusted for the effects of currency translation and the net impact, increased 0.8% compared to fiscal 2021. Our fourth quarter, fiscal 24, gross market. 21.5, a decrease of 110 basis points compared to the prior. We also provide the financial metric of the just, which is a non-GAAP financial measure that adjusts gross margin for the impact of the mark-to-market accounting related to our equipment financing portfolio and the Associated Interest Rates Swap Hedging.

Kevin Barry: Internal sales for fiscal 'twenty.

Which are adjusted for the effects of currency translation and the net impact on interest rate swaps increased <unk>, 8% compared to fiscal 2023.

Kevin Barry: Our fourth quarter fiscal 'twenty four gross margin was 21, 5% a decrease of 110 basis points compared to the prior year.

Kevin Caliendo: We also provide the financial metric of the adjusting gross margin, which is a nine-gap financial measure that adjusts gross margin for the impact of the mark-to-market accounting related to our coin financing portfolio and the associated interest rate swap heading instrument. The accounting impact of the mark-to-market adjustment affects our total company gross margin, but not the gross margin within our office and state. As previously mentioned, the net impact of interest rate fluctuations between the swap and the equivalent financing portfolio has a minimal impact on net income. For the fourth quarter of fiscal 24, our adjusted gross margin was 21.8%, a decrease of 90 basis points compared to the year-ago period.

Kevin Barry: We also provide the financial metric adjusted gross margin, which is a non-GAAP financial measure adjusted gross margin for the impact of the mark to market accounting related to our current financing portfolio and the associated interest rates swap hedging instruments.

Kevin Barry: The accounting impact of the mark to market, but not the gross margin within our business sector. As previously mentioned, the net impact of interest rates and the Equivalent Financing Portfolio has a minimal impact on net income. For the fourth quarter of fiscal 24, our adjusted gross margin was $21.8 billion. Decrease of 90 basis points compared to, The year-over-year decline in gross margins primarily drew attention to the revenue and profit shortfall in our dental segment related to the cybersecurity attack. Patterson's Relationship with Change Health.

Kevin Barry: The accounting impact of the Mark to market adjustment affects our total company gross margin, but not the gross margin within our business segments.

Kevin Barry: As previously mentioned the net impact of interest rate fluctuations between the swap and the equipment financing portfolio has minimal impact on net income.

Kevin Barry: For the fourth quarter of fiscal 'twenty four our adjusted gross margin was 21, 8% a decrease of 90 basis points compared to the year ago period.

Kevin Caliendo: The year or year decline in gross margin, primarily due to the revenue of the profit shortfall in our dental segment related to the cybersecurity attack and change health care. Patterson's relationship with Change Healthcare and their cybersecurity attacks significantly impacted many of our dental customers. They were unable to submit insurance claims. During the disruption of Change Health Care, we were unable to bill our dental customers for this valuable service, resulting in loss revenue and profit patterns. Our software team worked diligently and quickly to connect to our software platforms to alternative solutions to allow our customers to be able to process their insurance claims. Adjusted operating expenses as a percentage of net sales for the fourth quarter of fiscal 24, 15.8%, and favorable by 10 basis points compared to the fourth quarter of fiscal 23.

Kevin Barry: The year over year decline in gross margin was primarily due to the revenue and profit shortfall in our dental segment related to the cyber security attacks and change out.

Kevin Barry: Patterson's relationship of change healthcare their cyber security attacks significantly impacted many of our dental customers because they were unable to submit insurance claims.

Kevin Barry: Their cybersecurity attacks significantly impacted many of our dental customers, who were unable to submit insurance during the disruption and change health. We were unable to bill our dental customers for this valuable service, resulting in lost revenue and profit patterns. Our software team worked diligently and quickly to connect our software platforms to alternative platforms to allow our customers to be able to process. Adjusted Operating Expenditures. 15.8, favorable by 10 basis points compared to the fourth quarter.

Kevin Barry: During the disruption at change healthcare, we are unable to bill our dental customers for his valuable service, resulting in lost revenue and profits Patterson.

Kevin Barry: Our software team worked diligently and quickly to connect to our software platforms to alternative solutions to allow our customers to be able to process their insurance claims.

Speaker Change: Adjusted operating expenses as a percentage of net sales for the fourth quarter of fiscal 2015, 8% and favorable by 10 basis points compared to the fourth quarter of fiscal 'twenty three.

Kevin Caliendo: For the full year of fiscal 2024, adjusted operating expenses are percentage of net sales for 16.5%. And I'm favorable to the prior by 20 basis points compared to Fiscal 23. In the fourth quarter of fiscal 24, our consolidated operating margin was 6.0%. A decrease of 70 basis points compared to the fourth quarter of last year. For the full year of fiscal 24, our consolidated and adjusted operating margin is 4.6%. A decrease of 40 basis points compared to the prior fiscal year. Our adjusted tax rate for the fourth quarter of fiscal 24 was 23.3%. A decrease of 110 basis points compared to the prior year.

Speaker Change: For the full year of fiscal 2024, adjusted operating expenses as a percentage of net sales were 16, 5%.

Kevin Barry: Adjusted operating, 15.5, and unfavorable to the prior year by 20. In the fourth quarter of Fiscal 20- consolidated operating margin of 6.0%, a decrease of 70 basis points compared to the fourth quarter of last year, for the full year of fiscal, consolidated adjusted operating margin of 4.0, a decrease of 40 basis points compared to the prior, our adjusted tax rate for the fourth quarter of fiscal 2020. 23.3%, a decrease of 110 basis points compared to the prior; for the full year, the tax rate was 23.7%, an increase of 10, compared to the fall year.

Speaker Change: Unfavorable to the prior year by 20 basis points compared to fiscal 'twenty three.

Speaker Change: In the fourth quarter of fiscal 'twenty for our consolidated operating margin of 6.0% a decrease of 70 basis points compared to the fourth quarter of last year.

For the full year of fiscal 2004, our consolidated adjusted operating margin was four 6% a decrease of 40 basis points compared to the prior fiscal year.

Speaker Change: Alright, just a tax rate for the fourth quarter of fiscal 'twenty four it was 23, 3%.

Speaker Change: A decrease of 110 basis points compared to the prior year.

Kevin Caliendo: For the full year of fiscal 24, our adjusted tax rate was 23.7%. An increase of 10 basis points compared to the full year of fiscal 23. Reported net income, attributable to Patterson Company Zinc for the fourth quarter of fiscal 24 was 67 million dollars or 74 cents per diluted. Chair. This compares to reported net income in the fourth quarter of last year of $75 million or $0.70 per dilute share. Adjust in net income attributable to Patterson Companies Inc. In the fourth quarter of fiscal 24, which excludes deal amortization of $74.4 million or $82. per dilute chair.

Speaker Change: For the full year of fiscal 2004, our adjusted tax rate was 23, 7% an increase of 10 basis points compared to the full year fiscal 'twenty three.

Kevin Barry: Reported net income attributable to Patterson Companies Inc. for the fourth quarter of fiscal twenty-four, $67 million, or $0.74 per diluted share. This compares to reported net income in the fourth quarter of last year of $75 million, or $0.70. Just in net income attributable to Patterson Companies Inc. in the fourth quarter of fiscal 2015, which excludes deal amortization, $74.4 million, or $0.82 per diluted share.

Speaker Change: Reported net income attributable to Patterson companies, Inc. For the fourth quarter of fiscal 'twenty $467 million or <unk> 74 per diluted share.

Speaker Change: This compares to reported net income in the fourth quarter of last year of $75 million or <unk> 70 cents per diluted share.

Speaker Change: Adjusted net income attributable to Patterson companies, Inc. In the fourth quarter of fiscal 2004, which excludes deal amortization was $74 $4 million or <unk> 82 cents per diluted share.

Kevin Caliendo: This compares to $82.4 million or $84 per dilute chair in the fourth quarter of fiscal 23. The year-over-year decrease reported an adjusted net income attributable to Patterson Companies Inc. in the fourth quarter of fiscal 24 is primarily due to lower sales of equipment, as well as the change health care cybersecurity attack, which negatively impacted both reported in adjusted net income in the fiscal 24, fourth quarter by four cents per dilute chair. For the full year of fiscal 24, reported net income attributable to Patterson Companies Inc. was $185.9 million or $1.98 per dilute chair compared to $207.6 million or $2.12 per dilute chair in fiscal 2023.

Kevin Barry: This compares to $82.4 million, or $0.34 per million, for the fourth quarter of fiscal. The year-over-year decrease in reported and adjusted net income attributable to Patterson Companies Inc. in the fourth quarter of fiscal 2014, primarily due to lower sales of equipment, as well as the changed health care cyber security attack, which negatively impacted both reported and adjusted net income in the fiscal 2024 fourth quarter by four cents, for the full year of fiscal 24, reported net income attributable to Patterson Companies was $185.9 million.

Speaker Change: This compares to $82 $4 million or 84 cents per diluted share in the fourth quarter of fiscal 'twenty three.

Speaker Change: The year over year decrease in reported and adjusted net income attributable to Patterson companies, Inc. In the fourth quarter of fiscal 'twenty. Four is primarily due to lower sales of equipment as well as the change healthcare cyber security attack, which negatively impacted both reported and adjusted net income in the fiscal 2020 for fourth quarter.

Speaker Change: By <unk> <unk> per diluted share.

Speaker Change: For the full year of fiscal 'twenty four reported net income attributable to Patterson companies, Inc, was $185 $9 million or $1.98 per diluted share compared to $207 $6 million or $2 12 per diluted share in fiscal 2023.

Kevin Barry: $1.98 per diluted share, compared to $207.6 million. $2.12 per diluted share, just a net income attributable to Patterson Companies Inc. in fiscal 24, which excludes deal amortization, totaled $215.3 million or $2.30 per diluted shot, compared to $236.4 million.

Kevin Caliendo: Adjust in net income attributable to Patterson Companies Inc. In fiscal 24, which excludes deal amortization, totaled $215.3 million or $2.3 per dilute chair compared to $236.4 million or $2.42 per dilute chair in the prior fiscal year.

Speaker Change: Adjusted net income attributable to Patterson companies, Inc, and fiscal 'twenty four.

Speaker Change: <unk> deal amortization totaled $215 $3 million or $2.30 per diluted share compared to $236 $4 million or $2.42 per diluted share in the prior fiscal year.

Kevin Barry: $2.42 per diluted share in the prior. Now, let's turn to our business segments, starting with... In the fourth quarter of fiscal 24, internal sales for our company increased 3.8% compared to the fourth. Internal Sales of Dental Consumables increased 3.7% compared to one; Internal sales of non-infection control products increased 4.4% in the fourth quarter compared to the year ago period. This negative impact from infection-controlled product deflation has steadily moderated over the past, and we believe that this year-over-year deflationary effect has nearly normalized and will have minimal impact.

Kevin Caliendo: Now let's turn to our business segments, starting with our dental business. In the fourth quarter of fiscal 24, internal sales for our dental business increased 3.8% compared to the fourth quarter of fiscal 23. Internal sales of dental consumables in the fiscal fourth quarter increased 3.7% compared to one year ago. Internal sales of non-infection control products increased 4.4% to the fourth quarter of fiscal 24 compared to the year of a period. This negative impact from infection control product deflation has steadily moderated over the past year, and we believe that year-over-year deflationary effect has nearly normalized and will have minimal impact in the next fiscal year.

Kevin Barry: For the full year of Fiscal 24, internal sales of consumables increased by 4.4%. Internal Sales of Non-Infection Control Products, at 5.8, testament to the solid sales and passionate efforts to be indispensable partners to our dental customers across all types of practice models and them. In the fourth quarter of Fiscal 24, internal sales of dental equipment decreased 11.9% compared to the fourth quarter. Sales of all equipment categories declined due to a number of factors, including comparisons to the strong double-digit growth in the fourth quarters of fiscal 2020 for the full year of fiscal 24. Internal sales of dental equipment declined by 6.9%.

Speaker Change: Now, let's turn to our business segments, starting with our dental business.

Speaker Change: In the fourth quarter of fiscal 'twenty, four internal sales for our dental business decreased three 8% compared to the fourth quarter of fiscal 'twenty three.

Speaker Change: Internal sales of dental consumables for the fiscal fourth quarter increased three 7% compared to one year ago.

Speaker Change: <unk> sales of non infection control products increased four 4% in the fourth quarter of fiscal 'twenty four compared to the year ago period.

Speaker Change: This negative impact from an infection control product deflation is steadily moderated over the past year and we believe the year over year deflationary effect has nearly normalized and will have minimal impact in the next fiscal year.

Kevin Caliendo: For the full year of fiscal 24, internal sales of consumables increased by 4.4% compared to the prior year. Internal sales of non-infection control products increased by 5.8% for fiscal year 24 compared to fiscal 23. The strong above market growth and consumables is a testament to the solid sales execution of our dental sales team, and their passionate efforts to be indispensable partners to our dental customers across all types of practice models in the market. The fourth quarter of fiscal 24, internal sales of dental equipment decreased 11.9% compared to the fourth quarter of fiscal 23. Sales of all equipment categories decline year over year in the fourth quarter due to a number of factors that we have discussed previously, including the comparisons to the strong double-digit growth percentages in the fourth quarters of fiscal 23 and 22.

Speaker Change: For the full year of fiscal 'twenty, four internal sales of consumables increased by four 4% compared to the prior year.

Speaker Change: Internal sales of non infection control products increased by five 8% for fiscal year 'twenty for comparative fiscal 'twenty three.

Speaker Change: The strong above market growth in consumables is a testament to the solid sales execution of our dental sales team and their passionate efforts indispensable partners to our dental customers across all types of practice models in the market.

Speaker Change: In the fourth quarter of fiscal 'twenty, four internal sales of dental equipment decreased 11, 9% compared to the fourth quarter of fiscal 'twenty three.

Speaker Change: Sales of all equipment categories declined year over year in the fourth quarter due to a number of factors that we've discussed previously including the comparisons to the strong double digit growth percentages in the fourth quarters of fiscal 'twenty, three and 'twenty two.

Kevin Caliendo: For the full year of fiscal 24, internal sales of dental equipment declined by 6.9%. in terms of sales of value at the services before the order of fiscal 24 decreased 11% over the prior year period, primarily due to the negative impact of the cybersecurity attack on Change Health. Value-related services represent the entire suite of offerings we provide to our customers and help make us an indispensable partner to their practice. These valuable offerings are also mixed-favorable to our PNL. For the full year of fiscal 24, internal sales of value-headed services decline 0.8% compared to fiscal 23.

Speaker Change: For the full year of fiscal 'twenty for <unk>.

Speaker Change: Rental sales of dental equipment declined by six 9% over fiscal 'twenty three.

Kevin Barry: Internal Sales of Valley Head Services over the prior year period, primarily due to the negative impact of the cyber security attack on Gene Chalmers. Value Added Services, the entire suite of offerings we provide to our customers, help make us an indispensable partner to their practice, and these valuable offerings, for the full year of Fiscal 20- Thank you, Allied Health Services, for joining us. We appreciate it. Adjusted Operating Marge.

Speaker Change: Internal sales of value added services in the fourth quarter of fiscal 2004 decreased 11% over the prior year period, primarily due to the negative impact of the cyber security attacks and change healthcare.

Speaker Change: Value added services represent the entire suite of offerings, we provide to our customers and help make us an indispensable partner to their practice and these valuable offerings are also a mix favorable to our P&L.

Speaker Change: For the full year of fiscal 'twenty four.

<unk> sales of value added services declines you're up one 8% compared to 23.

Kevin Caliendo: Adjusted operating margin and dental, 10% in the fiscal fourth quarter, and a 210 of basis point decline over the prior year period. For the full year of fiscal 24, adjusted operating margins that our dental business were 9% in a 100 basis point decrease over the prior fiscal year. A fourth quarter and fiscal 24 dental adjusted operating margin was negatively impacted by the cybersecurity attack on Change Health years.

Speaker Change: Adjusted operating margins in dental 10% in the fiscal fourth quarter.

Kevin Barry: 10% in the fiscal fourth quarter, a 210 basis point decline over the prior year. For the full year of fiscal 24, adjusted operating margins in our dental business were 9%, and a 100 basis point decrease over the prior year.

Speaker Change: 210 basis point decline over the prior year period.

Speaker Change: For the full year of fiscal 'twenty four adjusted operating margins in our dental business with 9% and a 100 basis point decrease over the prior fiscal year.

Kevin Barry: Fourth Quarter and Fiscal 24 Dental Adjustment, negatively impacted by the cyber security attack on Now let's move on to our animal health. In the fourth quarter of fiscal 24, internal sales for our animal health increased 2.5% compared to the same period one year ago. For the full year of fiscal 24, internal sales for Animal Health. 1.3 percent. Internal sales for our production animal business, the fourth quarter of fiscal 24, increased 8.8% compared to the same period.

Speaker Change: Fourth quarter and fiscal 2000 and for dental adjusted operating margin negatively impacted by the cyber security attack on change healthcare.

Kevin Caliendo: Now, let's move on to our annual health service. In the fourth quarter of fiscal 24, internal sales for our annual health business increased 2.5% compared to the same period one year ago. For the full year of fiscal 24, internal sales for our annual health business were a 1.3% compared to fiscal year 23. Internal sales for our production animal business, a fourth quarter of fiscal 24, increased 8.8% compared to the same period one year ago. For the full year of fiscal 24, internal sales in our production animal business increased 4.2% compared to fiscal 23. This strong above-market growth in the fourth quarter and for the entire fiscal year reflects the focus and dedication of our team, our ability to serve various types of customers across multiple channels.

Speaker Change: Now, let's move on to our animal health segment.

Speaker Change: In the fourth quarter of fiscal 'twenty four internal sales for our animal health business increased two 5% compared to the same period, one year ago for.

Speaker Change: For the full year of fiscal 'twenty four internal sales for our animal health business were up one 3% compared to fiscal year 'twenty three.

Speaker Change: Internal sales for our production.

Speaker Change: Fourth quarter of fiscal 'twenty, four increased eight 8% compared to the same period one year ago.

Kevin Barry: For the full year of Fiscal 24, internal sales in our production animal business increased 4.2%. This strong, above-market growth in the fourth quarter and for the entire fiscal year reflects the focus and dedication of our community, our ability to serve various types of customers across multiple channels, and the value-added services that we deliver that drive deep and productive customers. Internal sales for our companion animal business in the fourth quarter of fiscal 24 declined 2.7% compared to the prior year; for the full year of Fiscal 2020, internal sales and our companion animal business decreased 1.1% compared to fiscal 2020, while market growth rates and companion animal prices moderate.

Speaker Change: For the full year of fiscal 'twenty four internal sales in our production animal business increased four 2% compared to fiscal 'twenty three.

Speaker Change: This strong above market growth in the fourth quarter and for the entire fiscal year reflects the focus and dedication of our team our ability to serve various types of customers across multiple channels.

Kevin Caliendo: And the value-added services that we deliver that drive deep and productive customer relationships. Internal sales for our campaigning animal business at a fourth quarter of fiscal 24 declined 2.7% compared to the prior year. For the full year of fiscal 24, internal sales in our campaigning animal business decreased 1.1% compared to fiscal 23. While market growth rates and campaigning animal moderated recently, our performance is more related to how we intentionally choose to nurture relationships and work with strategic partners to reward us for the high degree of value we provide in the channel and to our veterinarian customers.

Speaker Change: And the value added services that we deliver that drive team and productive customer relationships.

Speaker Change: Internal sales for our companion animal business, our fourth quarter of fiscal 2004 declined two 7% compared to the prior year for the <unk>.

Full year of fiscal 'twenty four internal sales in our companion animal business decreased one 1% compared to fiscal 'twenty three.

Speaker Change: While market growth rates in companion animal moderating our performance is more related to how we intentionally choose to nurture relationships work with strategic partners to reward us with a high degree of value, we provide in the channel and to our veterinarian customers.

Kevin Barry: Our performance is more related to how we intentionally choose to nurture relationships, strategic partners who reward us for the high degree of value we provide, who are veterinarians. Adjusted Operating Margins at our Animal Health... [inaudible] an increase of 30 basis points from the prior. Adjusted Operating Margins in our Animal Health Segment are 4.5%, which represents 20 basis points of margin expansion compared to fiscal 2020.

Kevin Caliendo: Adjusted operating margins in our annual health statement, fiscal 4.5.8% increase of 30 basis points from the prior year. For the full year of fiscal 24, adjusted operating margins in our animal health statement were 4.4%, which represents 20 basis points of margin expansion compared to fiscal 2023. Our animal health team continues to deliver improved profitability with a solid execution of margin-enhancing initiatives, including driving operational efficiencies, exercising expense discipline, growing their private label business, and maximizing rebate performance. With the strategic manufacturing partners reward us for a strong performance in the market.

Speaker Change: Adjusted operating margins in our animal health segment fiscal fourth quarter, and five 8% an increase of 30 basis points from the prior year.

Speaker Change: For the full year of fiscal 'twenty four adjusted operating margins in our animal Health segment were four 4%, which represents 20 basis points of margin expansion compared to fiscal 2023.

Kevin Barry: Our animal health team continues to deliver to improve profitability. Solid Execution of Margin Enhancing Initiatives, including Driving Operational Efficiencies, Exercising Expense, growing their private label business, and maximizing rebates, award us for a strong. Now, let me cover free cash flow and capital. During fiscal 24, our free cash flow declined by $8.6 million compared to the same period one year ago.

Speaker Change: Our animal health team continues to deliver improved profitability with our solid execution of margin enhancing initiatives, including driving operational efficiencies exercising expense discipline growing their private label business and maximizing breathing performance with a strategic manufacturing partners should reward us for a strong performance in the market.

Kevin Caliendo: Now let me cover free cash flow and capital allocation. During fiscal 24, our free cash flow declined by 8.6 million dollars compared to the same period 1 year ago. Due to our operational performance and an increased level of capital spending reflected in the investments we made in fiscal 24 to improve our distribution capabilities and enhance our software and value added value. Services. We continue to execute our strategy to return cash to our shareholders. At fourth quarter of fiscal 24, we declared a quarterly cash dividend of 26 cents per dilute share, which was then paid at the beginning of the first quarter of fiscal 25.

Speaker Change: Now, let me cover our free cash flow and capital allocation.

Speaker Change: During fiscal 'twenty for our free cash flow declined by $8 $6 million compared to the same period one year ago.

Kevin Barry: Due to our operational performance and an increased level of capital spending reflected in the investments we made in fiscal 24 to improve our distribution capabilities and enhance our software and value added, we continue to execute our strategy to return cash to our shareholders. In the fourth quarter of fiscal 24, we declared a quarterly cash dividend of $0.26 per diluted share, then paid at the beginning of the first quarter of fiscal 25. He also spent $14.9 million to repurchase shares during the fourth quarter, returning a total of $38.2 million to shareholders through dividends and shareware purchases, and for the entire.

Speaker Change: Our operational performance and an increased level of capital spending reflected in the investments we made in fiscal 'twenty four to improve our distribution capabilities and enhance our software and value added services.

We continued to execute our strategy to return cash to our shareholders.

Speaker Change: Quarter of fiscal 'twenty, four we declared a quarterly cash dividend of <unk> 26 cents per diluted share, which was then paid at the beginning of the first quarter of fiscal 'twenty five.

Kevin Caliendo: We also spent $14.9 million to repurchase shares during the fourth quarter of fiscal 24. Returning a total of $38.2 million to shareholders in dividends and share repurchases of fourth quarter of fiscal 24. And for the entire year of fiscal 24, we returned a total of $327.9 million to shareholders to dividends and share repurchases.

Speaker Change: He also spent $14 $9 million to repurchase shares during the fourth quarter of fiscal 'twenty four.

Speaker Change: Returning a total of $38 $2 million to shareholders dividends and share repurchases in the fourth quarter of fiscal 'twenty four.

Speaker Change: And for the entire year of fiscal 'twenty four.

Kevin Barry: We returned a total of $327.9 million. Let me conclude with our financial outlook. This morning, we issued a GAAP Earnings Guide for fiscal 25 of $2.00 to $2.10 per diluted share, and Adjusted Earnings Guidance of $2.33 to $2.43.

Speaker Change: We returned a total of $327 $9 million to shareholders through dividends and share repurchases.

Kevin Caliendo: Let me conclude with our financial outlet for Fiscal 25. This morning, we issued a gap earnings guidance range for fiscal 25 of $2 to $2.10 per dilute share and an adjusted earnings guidance range of $2.33 to $2.43 per dilute share. For modeling purposes, let me highlight a few additional items to factor in as you think about our guidance for fiscal 25. Our guidance range assumes a low single-digit sales group. Primarily reflecting the current macroeconomic conditions in our dental and animal health markets and roughly flat operating margins performance. The cybersecurity attack on Change Health will have a modest negative impact on both sales and margin performance for the full year due to the continued inability for some customers to process their claims near term, as well as the impact of our transition to alternative claims processing solutions.

Speaker Change: Let me conclude with our financial outlook for fiscal 'twenty five.

Speaker Change: This morning, we issued a GAAP earnings guidance range for fiscal 'twenty five of $2 to $2.10 per diluted share and an adjusted earnings guidance range of $2 33 to.

Speaker Change: $2 43 per diluted share for.

Kevin Barry: For modeling purposes, let me highlight a few additional items to factor in as you think about our guidance. Our guidance range assumes a low single digit, primarily reflecting the current macroeconomic conditions in our dental and animal health, roughly flat operating margin, and cyber security attack on change health, but we're having modest negative sales and margin performance for the full year due to the continued inability for some customers to process their claims, as well as the impact of our transition to alternative claims processes.

Speaker Change: For modeling purposes, let me highlight a few additional items to factor in as you think about our guidance for fiscal 'twenty five.

Speaker Change: Our guidance range assumes a low single digit sales growth.

Speaker Change: Primarily reflecting the current macroeconomic conditions in our dental and animal health markets.

Speaker Change: And roughly flat operating margin performance.

Speaker Change: The cyber security attack on change healthcare have a modest negative impact on both sales and margin performance for the full year.

Speaker Change: Due to the continued an ability for some customers to process their claims near term as well as the impact of our transition to alternative claims processing solutions.

Kevin Caliendo: We expect the year-over-year impact to give a greatest in Q1 and lessen until a positive comparison in Q4 of fiscal 25. Our operating margin expectations also reflect the impact of our continued investments in our commercial software franchise, offset by ongoing initiatives to drive and improve margin mix and additional operating efficiencies. We are assuming that interest expenses will be up slightly compared to fiscal 24. Our tax rate will be in the range of 24 to 25 percent, and our average share count in fiscal 25 will be lower than our average share count was in fiscal 24.

Kevin Barry: We expect the year-over-year impact to be the greatest in Q1 and to lessen until a positive operating margin expectations also. [inaudible] Software Franchise, Offset by Ongoing. [inaudible] We are assuming that interest expenses will be up slightly compared to... The tax rate will be in the range of $24 to $25, and our average share count in fiscal 25 will be lower than our average share count, our Adjusted Earnings Guidance Range of $2.00. $2.33, $2.43 per diluted shot, implies approximately 3% year-over-year.

Speaker Change: We expect the year over year impact greatest in Q1 and lessons until a positive comparison in Q4 of fiscal 'twenty five.

Speaker Change: Our operating margin expectations also reflect the impact of our continued investments in our commercial software franchise offset by ongoing initiatives to drive improved margin mix and additional operating efficiencies.

Speaker Change: We are assuming the interest expenses will be up slightly compared to fiscal 'twenty four attacks.

Speaker Change: Our tax rate will be in the range of 24% to 25%.

Speaker Change: And our average share count in fiscal 'twenty side will be lower than our average share count was in fiscal 'twenty four.

Kevin Caliendo: Our adjusted earnings guidance range of two dollars and 33 cents and two dollars and 43 cents per diluted share implies approximately 3 percent year-over-year growth in midpoint, which is enhanced by the yield provided by our dividend.

Speaker Change: Our adjusted earnings guidance range of $2 33 to $2.43 per diluted share implies approximately 3% year over year growth at the midpoint, which is enhanced by the yield provided by arguing that.

Donald J. Zurbay: Enhanced by the Yield-Provided By-Rate. And now, I will turn the call back over to Don for. Thanks, Kevin. Before we open it up for Q&A, I want to thank the entire Patterson team for their continued hard work and commitment to our strategy and serving our customers. As we enter fiscal 2025, we remain committed to executing our proven strategy focused on driving enhanced growth and profitability. Patterson's strong position, combined with disciplined capital allocation and the fundamentals of our end market, gives us confidence in our ability to deliver long-term value creation for our shareholders. That concludes our prepared remarks. Kevin and I will be glad to take questions. Operator, please open the line. Please press star 1 on your telephone keypad to raise your hand and join the queue.

John Wright: And now I will turn the call back over to John for some additional comments. Thanks, Kevin. Before we open it up for Q&A, I want to thank the entire Patterson team for their continued hardworking commitment to our strategy and serving your customers. As we enter fiscal 2025, we remain committed to executing our proven strategy focused on driving enhanced growth and profitability. Patterson's strong position combined with discipline capital allocation and the fundamentals were end marked as just as confidence in our abilities to deliver a long-term value creation for our shareholders.

Speaker Change: And now I will turn the call back over to Don for some additional comments.

Don Survey: Thanks, Kevin before we open it up for Q&A I want to thank the entire Patterson team for their continued hard work and commitment to our strategy and serving our customers.

Don Survey: As we enter fiscal 2025, we remain committed to executing our proven strategy focused on driving enhanced growth and profitability.

Don Survey: Patterson's strong position combined with disciplined capital allocation and the fundamentals of our end markets.

Don Survey: Gives us confidence in our ability to deliver long term value creation for our shareholders.

John Stansel: That concludes our prepared remarks. Kevin and I will be glad to take questions. Operator, please open the line. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Kevin Kelly from UBS. Your line is open. Thanks. Thanks for taking my question. Congrats on the quarter. Just wanted to talk about first the strong consumables number you put up. You said it was growing faster than market. It clearly looks like you're taking market share.

Speaker Change: That concludes our prepared remarks, Kevin and I will be glad to take questions. Operator. Please open the line.

Speaker Change: Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again. Your first question comes from the line of Kevin Kelly from UBS. Your line is open.

Operator: If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Kevin Caliendo from UBS. Your line is open. Thanks. Thanks for taking my question. Congratulations on the quarter. Oh, I just wanted to talk first about the strong consumables number you put up. You said it was growing faster than the market. It clearly looks like you're taking market share. Can you maybe talk about what you think the market's actually doing in terms of consumables and visits, how that's trended, and maybe, you know, why and how you've been able to take share in the quarter? Yeah. Hey, Kevin. It's Don.

Kevin Kelly: Thanks, Thanks for taking my question congrats on the quarter.

Kevin Kelly: Just wanted to talk about first the strong consumables number you put up you said it was growing faster than market, but clearly it looks like you're taking market share can you maybe talk about what you think the market's actually doing in terms of consumables and visits.

John Stansel: Can you maybe talk about what you think the market's actually doing in terms of consumables and visits, how that's trended and maybe, you know, how, why, and how you've been able to take share in the quarter? Yeah. Hey, Kevin, Stan. Thanks. Good morning. Good question. You know, I think the way we would view the consumable situation is that, you know, the market traffic has been steady. So that's been helpful. But, you know, this is six quarters in a row, at least by my count, that I feel like we've substantially exceeded the market in terms of growth and that we're taking share.

Speaker Change: Thats trended and maybe.

Speaker Change: Why and how you've been able to take share in the quarter.

Donald J. Zurbay: Thanks. Good morning. Good question. You know, I think the way we would view the consumable situation is that, you know, the market traffic has been steady, so that's been helpful. But, you know, this is six quarters in a row, at least by my count, that I feel like we've substantially exceeded the market in terms of growth and that, you know, we're taking share. And if you really look at the year XPP, you'd get a 6% growth for the year.

Tom: Yeah, Hey, Kevin It's Tom Thanks, Good morning, good question.

Tom: I think the way we would view the consumables situation is that the market traffic has been steady so that's been helpful.

Speaker Change: But this is six quarters in a row.

Speaker Change: At least by my count that I feel like we've substantially.

Speaker Change: Exceeded the market in terms of.

Speaker Change: Growth and that we're taking share.

Speaker Change: And and if you really look at the year ex PPE you'd get a 6% growth for the year. So this is kind of a sustained program I think when we look at this.

John Stansel: And if you really look at the year, XPP, you'd get a 6% growth for the year. So this is kind of a sustained program. I think when we look at this, you know, there's a number of factors involved here. We've had a very strategic approach to how we want to look at our consumables business. And so the strategies that we've employed, I think are starting to really take hold. You look at our value proposition to our customers. We've always been very focused on this piece of the customer experience. And so a sales force execution. And then, you know, we made some very significant investments in how we service DSOs and that segment of the market as well that I think are starting to pay off.

Donald J. Zurbay: So this is kind of a sustained program. I think when we look at this, there are a number of factors involved here. We've had a very strategic approach to how we want to look at our consumables business.

Speaker Change: Theres a number of factors involved here.

Speaker Change: We've had a very strategic approach to how we want to.

Donald J. Zurbay: And so the strategies that we've employed, I think, are starting to really take hold. You look at our value proposition to our customers. We've always been very focused on this piece of the customer experience. And so, a Salesforce execution.

Speaker Change: Look at our consumables business.

Speaker Change: And so the strategies that we've employed I think are starting to really take hold.

Speaker Change: You look at our value proposition to our customers.

Speaker Change: We've always been very focused on this piece of the.

Speaker Change: The customer experience.

And so our sales force execution and then.

Donald J. Zurbay: And then, you know, we've made some very significant investments in how we service DSOs in that segment of the market as well that I think are starting to pay off. So really, when you put all those together, there's just been sustained performance that we're very happy with. That's helpful.

Speaker Change: We've made some very significant investments in how we service dsos in that segment of the market as well that I think are starting to pay off so.

Kevin Caliendo: So really, when you put all those together, there's just been sustained performance that we're very happy with. That's helpful. If I can ask a quick follow-up, when we think about the sort of low single-digit revenue growth, you know, animal health is usually pretty relatively more predictable than what we've seen in dental. So should we assume that this sort of mid single-digit consumables growth continues? Does that underlie your assumption in dental? And what do you expect for equipment? I'm assuming that might be a drag on your growth rate, but I would love to hear your expectations around that for fiscal 25.

Speaker Change: Really when you put all those together, there's just been sustained performance that we're very happy with.

Donald J. Zurbay: If I can ask a quick follow-up question, when we think about the sort of low single-digit revenue growth, your animal health is usually relatively more predictable than what we've seen in dental. Should we assume that this sort of mid-single-digit consumables growth continues? Does that underlie your assumption in dental? And what do you expect for equipment?

Speaker Change: That's helpful.

Speaker Change: If I can ask a quick follow up when we think about the sort of low single digit revenue growth. Your animal health is usually pretty <unk>.

Speaker Change: A relatively more predictable than than what we've seen in dental should we assume that this sort of mid single digit consumables growth continues.

Speaker Change: Does that underlie your assumption in dental and what do you expect for equipment I'm, assuming that might be a drag on your growth rate, but I would love to hear your expectations around that for fiscal 'twenty five.

Kevin Barry: I'm assuming that might be a drag on your growth rate, but I would love to hear your expectations around that for fiscal 25. Yeah, yeah, good question. Well, let me maybe have Kevin give you just a little bit of color on that piece.

Kevin Caliendo: Yeah. Good question. Well, let me maybe have Kevin give you just a little bit of color on that piece. Yeah, I think I agree with you, Kevin. I think, you know, as we look at our mix for next year. You know, I would expect that consumables is going to be give around the dental side. And you know, as we watch the dental equipment market, you know, we're being somewhat cautious, just, you know, looking forward of, you know, what we expect out of those categories. You know, we still feel like those teams similar to this consumable story don't hold.

Speaker Change: Yeah, Yeah. Good question, well, let me maybe have Kevin.

Kevin Barry: Yeah, I think I agree with you, Kevin. I think, you know, as we look at our mix for next year, I would expect that consumables are going to be a good giver on the dental side. And, you know, as we watch the dental equipment market, we're being somewhat cautious just looking forward to, you know, what we expect out of those categories. But we still feel like those teams, similar to the consumable story Don told, we're executing really well with our customers.

Kevin: Give me just a little bit of color on that piece, yes, I think I agree with you Kevin I think as we look at our mix for next year.

Speaker Change: Okay, I would expect that consumables, that's going to be.

Speaker Change: Or on the dental side and you know as we've watched the dental equipment market.

Speaker Change: We're being somewhat cautious just kind of looking forward of what we expect out of those categories.

Speaker Change: We still feel like those teams similar to best consumable story towards we're executing really well with that customer as it continues to be a big part of our value proposition, but just given the overall market dynamic.

Kevin Caliendo: You know, we're executing really well with our customer as it continues to be a big part of our value proposition, but just given the overall market dynamic, especially early in the year here. We're a bit more cautious on equipment, but we do feel good about the dental consumables gains we've made to be sustainable. And as traffic maintains in the office. as we'll continue to get, you know, more than our fair share there. So just a net net animal health and dental should both support the low single-digit growth? Yes, yeah, an animal health. Yeah, I agree.

Kevin Barry: It continues to be a big part of our value proposition, but just given the overall market dynamic, especially early in the year here, we're a bit more cautious on equipment. But we do feel good about the dental consumables gains we've made to be sustainable. And as traffic maintains in the, get, you know, you know, are more than our fair share. So just a net-net, animal health and dental should both support low single-digit growth? Yes, yeah, on animal health.

Speaker Change: Especially early in the year here.

Speaker Change: We're a bit more cautious on equipment, but we do feel good about the dental consumables gains we have made to be sustainable.

Speaker Change: And as traffic maintains the offices will continue to get.

Speaker Change: Our more than our fair share there.

Speaker Change: Yeah.

Speaker Change: So just that so net net animal health and dental or ship both support the low single digit growth.

Kevin Barry: Yeah, yeah, I agree. We will see growth in animal health next year as well. You know, but I was speaking more specifically to the dental dynamics there. I mean, I just Donnie, I think our story is, It's somewhat similar to kind of where we've been over the last few quarters. And, you know, if you really break our business down, we feel good about the sustainability of dental consumables.

Speaker Change: Yes, yeah in animal health, Yeah, Yeah, I agree we see growth.

Kevin Caliendo: We see growth in animal health next year as well, you know, but I was speaking more specifically than dental dynamics for you. Yeah. I think our story is somewhat similar to kind of where we've been over the last few quarters, and, you know, if you really break our business down, you know, we feel good about the sustainability of the dental consumables. The animal health markets and sales have been good, particularly as they translate those sales dollars to the bottom line profitability. And, you know, the equipment market's been soft. And so, you know, we're looking for that to rebound, and when it does, I think that we feel like we're in an excellent position to take advantage of that.

Speaker Change: In animal health next year as well.

Speaker Change: But I will speak more specifically about that.

Speaker Change: Ill dynamics for the other.

Donny: This is Donny I think our story is.

Donny: It's somewhat similar to kind of where we've been over the last few quarters and if you really break our business down.

Donny: We feel good about the sustainability of the dental consumables, the animal health markets and sales have been have been good, particularly as they translate those sales dollars to bottom line profitability.

Kevin Barry: The animal health markets and sales have been good, particularly as they translate those sales dollars to bottom-line profitability, and you know the equipment market's been soft, and so we're looking for that to rebound, and when it does, I think that we feel like we're in an excellent position to take advantage of that. Thanks so much, guys. Your next question comes from the line of Nathan Rich from Goldman Sachs. Your line is open. Great. Good morning, and thanks for the questions.

And.

Donny: The equipment market has been soft and so we're we're looking for that to rebound and when it does I think that we feel like we're in an excellent position.

Donny: Take advantage of that.

Donny: Yeah.

Operator: Thanks so much, guys.

Speaker Change: Thanks, so much.

Nathan Rich: Your next question comes from a line of Nathan Rich from Goldman Sachs. Your line is open. Great. Good morning, and thanks for the questions. Maybe just following up on the comments on animal health. Your companion animal, I think, was down in the Quarter. You know, when we look at things like Vecclinic revenue, I mean, it's still growing. Could you maybe just talk about what drove that performance? And it sounded like you may have changed some manufacturer relationships. Could you just maybe talk about, you know, why those were made? Did you kind of focus on kind of the higher margin areas of the business?

Speaker Change: Your next question comes from the line of Nathan Rich from Goldman Sachs. Your line is open.

Nathan Allen Rich: Great Good morning, and thanks for the questions maybe.

Kevin Barry: Maybe just following up on the comments on animal health, your companion animal business, I think was down in the quarter. You know, when we look at things like vet clinic revenue, I mean, it's still growing. Can you maybe just talk about what drove that performance? And it sounded like you may have changed some manufacturer relationships. Can you maybe talk about, you know, why those were made?

Speaker Change: Maybe just following up on the comments on animal health.

Nathan Allen Rich: Companion animal I think it was down in the quarter.

Speaker Change: When we look at things like Vet clinic revenue I mean, it's still growing could you maybe just talk about.

Don Survey: What drove that performance and it sounded like you may have changed some manufacturer relationships can you just maybe talk about why those were made as you kind of focus on kind of the higher margin areas of the business and then Don I think you said that longer term youre kind of expecting low single digit growth for companion feel like this is maybe a little bit.

Kevin Caliendo: And then, Don, I think you said that longer term, you're kind of expecting low single-digit growth for companion. I feel like that's maybe a little bit softer than what we're used to hearing from companies in this space. Could you maybe just talk about that longer-term outlook? Yeah. Nathan is Kevin. I'll start and turn over to Don. He's on the modeling side. Yeah, I think, you know, for what we're seeing in the companion animal business from a market standpoint, the lines with your view, you know, we expected a moderation this past year after the highest kind of coming out of COVID.

Speaker Change: Softer than what we're used to hearing from companies in this space could so could you maybe just talk about.

Speaker Change: The longer term outlook.

Kevin Barry: Did you kind of focus on kind of the higher margin areas of the business? And then, Don, I think you said that, longer term, you're kind of expecting low single-digit growth for companion. I feel like that's maybe a little bit softer than what we're used to hearing from companies in this space. So could you maybe just talk about that longer-term outlook? Yeah. Hi Nathan. This is Kevin.

Kevin: Yeah, Hi, Nathan it's Kevin I'll start and I'll turn it over to that is in our modeling side, Yeah, I think for what we're seeing in the companion animal business from a market standpoint Alliance with Europe, we expected a moderation this past year after the highest kind of coming out of Covid.

Kevin Caliendo: And we do see the traffic become more steady now. What we've made the strategic decision around is certain parts of our business, when we looked at them that we said, you know, they weren't delivering the contribution margin we needed, and the teams made some decisions to shift our mix to new customers and new products away from some of those customers' manufacturers. We still see a little bit of that's going to weigh on the top line here in the early part of fiscal 25, but like Don alluded to earlier, you know, these are really healthy things for that business to do from an overall business model standpoint that we'll continue to manage through this year.

Kevin: And we do see the traffic become more more steady now.

Speaker Change: But we've made the strategic decision around as you know in certain parts of our business. When we looked at them that we are setting out they werent deliberately.

Contribute in March when we need it and the team has made some decisions to shift our mix to new customers and new products away from some of those customers and manufacturers.

Speaker Change: We still see a little bit of that's going to weigh on that top line here in the early part of fiscal 'twenty five.

Speaker Change: Don alluded to earlier.

Speaker Change: These are really healthy thanks for that business to do from our overall business model standpoint.

Speaker Change: That will continue to manage through.

Speaker Change: This year.

Kevin Caliendo: Yeah, I think for me, one of the important things that I think might might be a bit lost in the numbers and come the way we report this, but both sides of the animal health business, the companion side and the production animal side, actually reported a record operating profit this quarter, all-time record operating profit this quarter. So, you know, sales aside, I think what's translating to the bottom line is exactly okay, and maybe just on the longer-term outlook for low single-digit growth for companion? I think that's a little more toward, I wouldn't say that long-term beyond our fiscal year guide and outlook, Nathan and Nathan, so sorry.

Kevin Barry: I'll start and turn it over to Don. He's on the modeling side. Yeah, I think, you know, for what we're seeing in the companionable business from a market standpoint, the lines with your view, we expected a moderation this past year after the highs kind of coming out of COVID. And we do see the traffic becoming more steady now. What we've made the strategic decision around is certain parts of our business, when we looked at them, that we said, you know, they weren't delivering the contribution margin we wanted, to shift our mix to new customers and new products away from some of those customers and manufacturers.

Speaker Change: Yes, I think.

Speaker Change: For me one of the important things that I think might might be a bit lost.

Speaker Change: And the numbers and kind of the way we report this but.

Speaker Change: Both sides of the animal health business, the companion side and the production animal side actually reported.

Speaker Change: Record operating profit this quarter.

Speaker Change: All time record operating profit this quarter so.

Speaker Change: Sales aside I think what's translating to the bottom line is exactly what we want.

Okay.

Speaker Change: Okay, and maybe just on the longer term outlook for low single digit growth for companion.

Speaker Change: I think that's a lean more toward a I wouldn't say that long term beyond kind of our fiscal year guide and outlook.

Speaker Change: The fundamentals the fundamentals of that market, we still see in terms of the trends in terms of how pet owners spend on their pets the.

Kevin Caliendo: Fundamentals. Yeah, the fundamentals of that market we still see in terms of trends, in terms of, you know, how pet owners spend on their pets, the innovation that's coming in that category, that category to service, you know, pet health. Those fundamentals are absolutely still continuing, so we still think over the longer-term horizon, we'd expect that to be grow the creatives on our portfolio. Okay, sorry, I misunderstood, so the low single-digit more referred to fiscal 25? Yeah, correct. Okay, sorry, and then just a quick follow-up: the impact from the change disruption, I think, continuing into the first quarter, I guess, Kevin, any sense of magnitude relative to what you experience in the fiscal fourth quarter?

Speaker Change: The innovation, that's coming in that category and that that.

Speaker Change: In that category to serve as a pet health.

Speaker Change: Those fundamentals are absolutely still continuing so we still think over that.

Speaker Change: Longer term horizon, we expect that to be at growth accretive to our portfolio.

Speaker Change: Okay, sorry, I misunderstood so the low single digit or more refer to fiscal 'twenty five.

Speaker Change: Correct Yep, Okay, sorry, and then just a quick follow up the impact from the change disruption I think continuing in to the first quarter I guess.

Kevin Barry: We still see a little bit of that going to weigh on the top line here in the early part of fiscal 25, but like Don alluded to earlier, you know, these are really healthy things for that business to do from an overall business model standpoint.

Speaker Change: Kevin any sense of magnitude relative to what you experienced in the fiscal fourth quarter and then you know.

Kevin Caliendo: And then, you know, I guess, you know, can you talk about maybe what the lingering impact is, because I thought that kind of change was largely back up and running, but I just be curious kind of what you're kind of seeing more real-time in terms of the impact that you expect to continue. Yeah, you know, as we look, in terms of the impact, you know, we quantified it at about four cents here in Q4. I think it will be a little bit less than that in here in Q1, a comparative basis compared to Q1 last year, and then Q2 and Q3 slightly less than that, and then Q4 will have a positive comp.

Speaker Change: I guess.

Can you talk about maybe what the lingering impact is because I thought that kind of change was largely back up and running but I'd just be curious kind of what youre kind of seeing more real time in terms of the impact that you expect to continue.

Donald J. Zurbay: Yeah, I think... For me, one of the important things that might be a bit lost in the numbers and kind of the way we report this, but both sides of the animal health business, the companion side and the production animal side, actually reported a record operating profit this quarter, an all-time record operating profit this quarter. So, you know, sales aside, I think what's translating to the bottom line is exactly, Okay, and maybe just on the longer-term outlook for low single-digit growth for Companion.

Speaker Change: Yeah.

Donald J. Zurbay: I think that's alluding more toward, I wouldn't say that's long term beyond kind of our fiscal year guide and outlook. The fundamentals of that market we still see in terms of the trends, in terms of how pet owners spend on their pets, the innovation that's coming in that category to service, and pet health. Those fundamentals are absolutely still continuing. So we still think over the longer term horizon, we'd expect that and growth at Creative Tower Ports. Okay, sorry, I misunderstood. So the low single digit more refers to fiscal 25. Okay, sorry.

Speaker Change: Look in terms of the impact.

Speaker Change: Want to fight it at about four cents here in Q4.

Speaker Change: It will be a little bit less than that here in Q1 on a comparative basis compared to Q1 of last year.

Speaker Change: And then Q2 and Q3 slightly less on that and then Q4 will have a positive comp and the dynamic as you know what we're dealing with here in the near term as you know the team is still working really diligently to get some customers back up onto our new our new provider for claim service. So we have a gap in terms of the customers and the number of claims that are ranked through.

Kevin Caliendo: And the dynamic is what we're dealing with here in the near term is, you know, the team is still working really diligently to get some customers back up onto our new provider for claim services, so we have a visit gap in terms of the customers and the number of claims that are running through our software, so that's a bit of a near-term gap. You know, longer term, you know, we do expect that there's going to be some leakage from the franchise we had with Change Health Care and our Eagle Software franchise compared to what the new environment is going to be.

Speaker Change: Our software.

Speaker Change: So that's a bit of a near term cab.

Longer term.

Speaker Change: We do expect that theres going to be some some leakage from.

Speaker Change: Franchise, we had with change healthcare and our <unk> franchise compared to what the new environments kind of be.

Kevin Caliendo: And that's really what we're going to see in Q2 and Q3 until we lapped the issue here in Q4 of this year. The issue here we had in Q4 of Cisco 24, it was really, you know, we just going to charge our customers, the service wasn't being provided there for a couple of months and that was bringing, you know, and now we're back providing the service again, but just way to lower volume. Yeah, and just to be clear, I'll add, you know, the move from Change Health; we move from Change Health Care, so we now have a new provider. So you mentioned Change is back up, but in terms of what the way we approach this, we move to a different provider for this service.

Speaker Change: And that's really what we're going to see in Q2 and Q3, yet until we lap the issue here in Q4 of this year. The issue here, we had in Q4 of fiscal 'twenty four.

Kevin Barry: And then just a quick follow-up. The impact from the change disruption, I think continuing into the first quarter, I guess, Kevin, any sense of magnitude relative to what you experienced in the fiscal fourth quarter? And then, you know, I guess, you know, can you talk about maybe what the lingering impact is? Because I thought that kind of change was largely back up and running, but I'd just be curious about what you're seeing more real-time in terms of the impact that you expect to continue. Yeah, and as we look in terms of the impact, you know, we quantified it at about four cents here. [inaudible] our new provider for claim services.

Kevin Barry: So we have a bit of a gap in terms of the customers and the number of claims that are running through our software. So that's a bit of a near-term gap, you know, longer term. You know, we do expect that there's going to be some leakage from the franchise we had with Change Healthcare and our Eaglesoft franchise compared to what, environments. And that's really what we're going to see in Q2 and Q3 until we solve the issue of this year.

Speaker Change: It was really we just going to charge our customers. The service wasn't being provided there for a couple of months and that was spring and now we're back providing the service again, but just at a lower volume and just to be clear I I'll add.

Speaker Change: The move from change we moved from change healthcare. So we now have a new provider.

Kevin Barry: The issue here we had in Q4 of Fiscal 24, it was really... [inaudible] So you had mentioned changes back up, but in terms of the way we approach this, we moved to a different provider for this service. Okay, great. Thanks very much for the questions.

Speaker Change: You had mentioned changes back up but in terms of what the way. We approach. This we moved to a different provider for the service.

Operator: Okay, great. Thanks very much for the questions.

Speaker Change: Okay, great. Thanks, very much for the questions.

Speaker Change: Okay.

Elizabeth Anderson: You were next question comes to the line of Elizabeth Anderson forever quarter ISI. Your line is open. Hi guys, thanks so much for the question. One thing I wanted to dig into a little bit more was the equipment performance in the quarter that came through very nicely, despite a tough calm. And I know last year you had some like pull forward and dental equipment into the fourth quarter and then some, you know, outperformance in some of the base equipment in the first quarter. So can you sort of help us make sure we understand sort of the areas of strength in the fourth quarter and then how to think about maybe the first quarter in a little bit more detail.

Elizabeth Hammell Anderson: Your next question comes from the line of Elizabeth Anderson from Evercore ISI. Your line is open. Hi guys, thanks so much for the question. One thing I wanted to dig into a little bit more was the equipment performance in the quarter, which came through very nicely despite a tough comp. And I know last year you had some like pull forward of dental equipment into the fourth quarter and then some outperformance in some of the base equipment in the first quarter.

Speaker Change: Your next question comes from the line of Elizabeth Anderson from Evercore ISI. Your line is open.

Hi, guys. Thanks, so much for the question I'm wondering I wanted to dig into a little bit and Lori gwizdala equipment. Our performance in the quarter that came through a very nicely. Despite a tough comp and I know last year, you had some pull forward of dental equipment into the fourth quarter and then some outperformance in some of the base equipment in the first one.

Elizabeth Hammell Anderson: So can you sort of help us make sure we understand sort of the areas of strength in the fourth quarter and then how to think about maybe the first quarter in a little bit more detail? Yeah, so I'd say here in the fourth quarter, like you mentioned, Elizabeth, we expected, you know, coming up against a tough comp, we were gonna see some, some lower sales volumes, and that came through, I'd say, fairly, across the subcategories, you know, core and our technology, which is really a unit story.

Speaker Change: So can you sort of help us make sure we understand sort of the areas of strength in the fourth quarter and then how to think about maybe the first quarter and a little bit more detail.

Kevin Caliendo: Yeah, so I'd say here in the fourth quarter, like you mentioned, Elizabeth, we expected coming up against a tough comp, we were going to see some lower sales volume, but that came through, I'd say, fairly consistently across the subcategories, core and our technology, which it was really a unit story. It was lower units compared to a year ago. Again, as we somewhat expected given the performance in Q4 of fiscal 23 compared to two really strong quarters that year before, so there was necessarily one category that stuck out as fairly broad. I think as we look here into the new fiscal year, like I said earlier, we're being fairly cautious in our outlook here.

Speaker Change: Yes, so I'd say here in the fourth quarter. Thank you mentioned all of US at best we expect that you have coming up against the tough comp we were going to see some.

Speaker Change: Some lower sales volumes that came through I would say fairly consistently across the subcategories core and our technology, which is really a unit story you know that was you know.

Elizabeth Hammell Anderson: You know, it was, you know, lower units compared to a year ago, again, as we somewhat expected, given the performance in Q4 of fiscal 23, compared to two really strong quarters. So that wasn't necessarily one category that stuck out, fraud.

Speaker Change: Lower units compared to a year ago again, as we somewhat expected given the performance in Q4.

Fiscal 'twenty three compared to two really strong quarters and years before so that was so there wasn't necessarily one category that stuck out as fairly broad I think as we look here into the into the new fiscal year al Yeah, like I said earlier, we're being fairly cautious in our outlook here.

Kevin Barry: I think as we look, you know, here into the heat of the new fiscal year, you know, like I said earlier, we're being fairly cautious in our outlook here. In the near term, like you alluded to, we had a fairly strong equipment quarter last year in Q1 at CORE that we'll be comping over here. But more broadly, you know, I think we still see good opportunities for us to service our customers that, you know, have a need for new equipment upgrades this year. But in a year where, you know, there's not necessarily a macroeconomic catalyst that we're projecting at this point, you know, we're expecting, fairly modest growth in our F-25.

Kevin Barry: And I think the other thing I'd add is, you know, we're the other reason we're being cautious is there's not as much sight into a bit of an innovation cycle this year. So innovation is a topic. You know, I mentioned our partnership with Conversion Dental, which we're very excited about, as innovation here, but, but overall, we're probably a little bit down on the innovation side. And I just want to follow up on what you were saying about the sort of PPE impact to be mindful of in the first quarter as well.

Kevin Caliendo: In the near term, like you alluded to, we had a fairly strong equipment quarter last year in Q1, a core that will be coming over here, but more broadly, I think we still see good opportunities for us to service our customers that have a need for new equipment upgrades this year. But in a year where there's not necessarily a macroeconomic catalyst that we're projecting at this point, we're expecting it to be fairly modest and our F-25 guy. The other thing I'd add is the other reason we're being cautious is there's not as much sight into a bit of an innovation cycle this year.

Speaker Change: In the near term.

Speaker Change: Two we had a fairly strong equipment quarter of last year in Q1, and core that will be comping over here.

Speaker Change: But more broadly I think we still see good opportunities for us to service our customers that are at.

Speaker Change: The need for equipment upgrades this year, but in a year where there.

Speaker Change: There is not necessarily a macroeconomic catalysts that we're projecting at this point.

Speaker Change: We're expecting it to be fairly.

Speaker Change: Modest in our F 'twenty five guidance.

Speaker Change: I mean I think.

Speaker Change: Other thing I would add as well.

Speaker Change: The other three other reason were being cautious as theres not theres not as much site into.

Speaker Change: Good of an innovation cycle this year so.

Kevin Caliendo: Innovation is a topic. I mentioned our partnership with Conversion Dental, which we're very excited about as innovation here, but overall we're probably a little bit down on the innovation side. That makes total sense. And I know just I want to follow up to about what you were saying about the sort of PPE impact to be mindful of in the first quarter as well. I know in one Q I think last year you called out on the dental side maybe close over a 2% impact from that year over your negative PPE price. Can you help us sort of like relatively size that because it seemed to be again about 2% or so in the fourth quarter, just so that we make sure that we're not missing that in terms of that versus the underlying strong consumable growth?

Speaker Change: Innovation is a topic.

Speaker Change: I mentioned, our partnership with conversion to dental, which we're very excited about.

Speaker Change: As innovation here, but but overall, we're probably a little bit down on the on the innovation side.

Speaker Change: That that makes total sense and I know just one follow up to about what you were saying about the sort of P. P impact could be mindful of in the first quarter as well I know in <unk> I think last year, you called out on the dental side, maybe close over a 2% impact from that year over year negative P. P. Price can you help us sort of like relative.

Kevin Barry: I know in one queue, I think last year you called out on the dental side, maybe close to a 2% impact from that year over year negative PPE price. Can you help us sort of like relatively size that because it seems to be again about, you know, 2% or so in the fourth quarter, just so that we make sure that we're not, you know, missing that in terms of that versus the underlying strong.

Speaker Change: Lease size that because it seems to be again.

Speaker Change: Yes, 2%, 2% or so in the fourth quarter, just so that we make sure that we're not.

Speaker Change: Missing that in terms of that versus the underlying strong consumable growth.

Kevin Caliendo: Yeah, so those are the way that we've been impacting it. We've got a basket of goods that have really been impacted by that deflation. And we sort of look at the average price of that basket. And in our fiscal 24, really we saw that kind of aggregate price stabilized, I'd say, you know, late Q2 of this past fiscal year, where it's kind of been in the same relative zone since then. And so we say that the pricing has stabilized. So for us looking at fiscal 23, you know, we'll have minor comp to that compared to our fiscal one of fiscal 24 year ago where the pricing was, it wasn't as dramatic a drop as we saw fiscal 24 versus fiscal 23.

Kevin Barry: Yeah, so the way that we've been tracking it, we've got a basket of goods that have really been impacted by that deflation, and we sort of look at the average price of that basket. And in our fiscal 24, really, we saw that kind of aggregate price stabilize, I'd say late Q2 of this past fiscal year, where it's kind of been in the same relative zone since then. And so we'd say that the pricing has stabilized, you know, so for us looking at Fiscal 23, we'll have a minor comp to that compared to our Fiscal 1 of Fiscal 24 a year ago, where the pricing wasn't as dramatic a drop as we saw in Fiscal 24 versus Fiscal 23, but it's still going to be somewhat of a drop into that basket and then moderating really and hopefully much more negligible in Q2. That's super helpful.

Speaker Change: Yeah. So the way that we've been tracking and we've got a basket of goods that had really been impacted by that deflation and we sort of look at the average price of that basket and into our fiscal 'twenty four.

Speaker Change: We saw that aggregate price stabilize I'd say.

Speaker Change: Late Q2.

Speaker Change: This past fiscal year, where it's kind of been at the same relative times since then.

And so we said that the pricing has stabilized so for us looking at fiscal 'twenty three.

Speaker Change: We'll have minor comp to that compared to.

Speaker Change: Our fiscal Q1 of fiscal 'twenty, four a year ago, where the pricing was it wasn't as dramatic a drop as we saw fiscal 'twenty four versus fiscal 'twenty three.

Kevin Caliendo: But it's still going to be somewhat of a drop for that basket, and then moderating really, and hopefully much more negligible in Q2. on Beyond. Got it. That's super helpful. Thank you very much.

Speaker Change: But it's still going to be somewhat of a drag for that basket and then moderating really hopefully much more negligible in Q2 and beyond.

Speaker Change: Got it that's super helpful. Thank you very much.

Allen Lutz: Your next question comes from a line up, Allen Lutz, from Think of America. Your line is open. Good morning, and thanks for taking the questions. You know, as you talked about the Hieropics last quarter around distribution facilities coming online and then the ongoing investments in software, how should we think about how those expenses are going to move forward in the fiscal 25 and what is embedded in the guide? And is it fair to assume that maybe 3Q or 4Q of 2024 was peak spending in those areas? Thanks. Yeah, I say from an investment somewhere, they're really two big drivers.

Elizabeth Hammell Anderson: Thank you very much. Your next question comes from a line of Allen Lutz from Bank of America. Your line is open. Good morning, and thanks for taking the questions. You know, as you talked about the higher off X last quarter around distribution facilities coming online and then the ongoing investments in software, how should we think about how those expenses are going to move forward in fiscal twenty five? And what's embedded in the guide?

Speaker Change: Your next question comes from the line of Alan <unk> from Bank of America. Your line is open.

Allen Charles Lutz: And is it fair to assume that maybe three Q or four Q of twenty twenty four was peak spending in those areas? Thanks. Yeah, I'd say from an investment standpoint, they're really two big drivers. One was, like you alluded to, we brought on two new facilities and did an ERP implementation in our Canadian dental business. Those expenses, there is some tail on those expenses now that the business has those capabilities, but for the most part, the kind of startup costs, but and so that's a little bit of a tailwind we have going, but what's sustainable in our op-ex structure. You know, this is an investment that we've made. It shows up somewhat in our capital expenditures but also in our operating expenses.

Good morning, and thanks for taking the questions.

Speaker Change: As you talked about the higher Opex last quarter around distribution facilities coming online and then the ongoing investments in software how should we think about how those expenses are going to move forward into fiscal 'twenty five and what's embedded in the guide and is it fair to assume that maybe <unk> of 2024 with peak spending.

Speaker Change: In those areas.

Speaker Change: Yes, I would say.

Speaker Change: From an investment stay where they are really two big drivers. One was like you alluded to we brought on two new facilities.

Kevin Caliendo: One was like he alluded to. We brought on two new facilities recently, and we did an ERP implementation in our Canadian dental business. Those expenses, there is some tail on those expenses now that the business has those capabilities, but for the most part, the kind of startup costs are done. And so that's a little bit of a tail when we have going into next year. But what's the state sustaining in our op-ex structure is the investments that we're making in our commercial software franchise, particularly in the dental business. You know, this is an investment that we've made.

Speaker Change: And we did our ERP implementation in our Canadian dental business.

Speaker Change: Those expenses there is some tail on those expenses now at the business SaaS those capabilities, but for the most part the kind of startup costs are done.

Speaker Change: But and so that's a little bit of a tailwind we have going into next year, but what's the state of sustaining and our.

Speaker Change: Opex structure is.

Vestments that we're making in our commercial software franchise, particularly in the dental business.

Speaker Change: This is a investment that we've made and it shows up somewhat in our capital expenditures, but also in our Opex.

Kevin Caliendo: It shows up somewhat in our capital expenditures, but also in our op-ex. And this is really around our dental predispanagement system, Eagles, softened fees, as well as our orthosystem Dolphin. And those investments, we've seen really good progress in the product development cycle on those over the past years. We've increased our investments there. We've gotten really good feedback from our customers. And we still have some work to continue enhancing those and also improve our go-to-market capabilities to commercialise those products that will continue here in the fiscal 25. Thanks, Kevin. And then one quick follow-up here. The revenue that four cent had went from change.

Kevin Barry: And this is really around our dental price management system, EagleSoft, as well as our orthosystem, Dalton. And those investments; we've seen really good progress in the product development cycle on those over the past years. We've increased our investments there, and we've gotten really good feedback from our customers. And we still have some work to do to continue enhancing those and also improve our go-to-market capabilities to commercialize those products, which will continue into fiscal 2021. Thanks, Kevin.

Speaker Change: This is really around our dental.

Speaker Change: Price management system single soften for us.

Speaker Change: As well as our ortho system dolphin.

Speaker Change: And those investments we've seen really good progress.

Speaker Change: The product development cycle on those over the past year as we've increased our investments there we've gotten really good feedback from our customers and.

Speaker Change: And we still have some somewhere two to continue enhancing the OS and also improve our go to market capabilities to commercialize those products that will continue here into fiscal 'twenty five.

Kevin Barry: And then one quick follow up here. The revenue, that $0.04 headwind from change, I know that you said you stopped charging. But is that revenue that was impacted there completely lost revenue?

Speaker Change: Thanks, Kevin and then one quick follow up here the revenue that <unk> <unk> headwind from change I know that you said you stopped charging is that revenue that was impacted there completely lost revenue or should we expect at some point that the.

Kevin Caliendo: I know that you said you stopped charging. Is that revenue that was impacted there, completely lost revenue? Or should we expect at some point that the revenue from that flows through, just trying to get a sense of whether or not that could be a tail end or if it's just completely lost revenue? Thanks. Unfortunately, that's just lost. That's just lost. Folks have to find some other work around at that time frame to get their claims processed. So that's just lost revenue for our standpoint. Makes sense. Thank you very much.

Speaker Change: The revenue from that flows through just trying to get a sense of whether or not that could be a tailwind or if it's just completely lost revenue.

Kevin Barry: Or should we expect at some point that the revenue from that flows through? Just trying to get a sense of whether or not that could be a tailwind, or if it's just completely lost revenue. Thanks. Unfortunately, that's just lost revenue. Folks had to find some other workaround in that time frame to get their claims processed.

Speaker Change: Unfortunately, that's just the that's just lost.

Speaker Change: That's just lost folks had to find some other work around at that timeframe to get their claims process.

Kevin Barry: So that's just lost revenue for us. Makes sense. Thank you very much.

Speaker Change: So that's just lost revenue far standpoint.

Speaker Change: Makes sense. Thank you very much.

Jeffrey Johnson: Your next question comes from a line of Jeff Johnson from Baird. Your line is open. Thank you. Good morning, guys. Kevin or Don need to want to guess maybe if I can just pull together a few comments you've made and just make sure I'm kind of understanding things correctly. So it sounds like you're saying that you would expect both the dental business and the animal health business to grow maybe low single digits in 2025. And then within dental, it sounds like Don, you've mentioned stability a few times. That single digit growth rate on the consumable.

Jeffrey D. Johnson: Your next question comes from Jeff Johnson from Baird. Your line is open. Thank you. Good morning, guys. Kevin or Don, either one, I guess.

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

Jeffrey D. Johnson: Thank you good morning, guys.

Speaker Change: Kevin or dominant either one I guess, maybe if I can just pull together a few comments you've made and just make sure I'm kind of understanding things correctly. So it sounds like Youre, saying that you would expect both the dental business and the animal health business to grow maybe low single digits in 2025, and then within dental it sounded like Don you've mentioned stability a few times that mid single digit growth.

Kevin Barry: Maybe I can just pull together a few comments you've made and just make sure I'm kind of understanding things correctly. So it sounds like you're saying that you would expect both the dental business and the animal health business to grow maybe in low single digits in 2025. And then within dental, it sounds like Don, you've mentioned stability a few times, that single-digit growth rate on the consumable. So if we kind of plug that into the model, would it be fair to assume equipment and kind of your internal assumptions? And I know you don't guide to revenue, but is it down low to mid single digits for equipment this year? Was there any kind of change in the trend line? Is the equipment market getting better? Worse?

Speaker Change: Great on the consumable sales.

Jeffrey Johnson: So if we kind of plug that into the model, would it be fair to assume equipment then kind of your internal assumptions? And I know you don't guide to revenue, but it is down low to mid single digits for equipment this year. Was there any kind of change in trend line? Is that equipment market getting better or worse? No change? Just kind of down that low to mid single digits, as you can see in most of the past 12 months. Thanks. Yeah, no, I think you have it exactly right. I mean, that's kind of how we're looking at our performance in the market, and we look at the market that way.

Speaker Change: Putting that into the model.

Speaker Change: Fair to assume equipment than kind of your internal assumptions and I know you don't guide to <unk>.

Revenue is down low to mid single digits for equipment. This year was there any kind of change in trend line is that equipment market getting better worse no change just kind of down that low to mid single digits that you've seen most of most of the past 12 months.

Kevin Barry: No change. Just kind of down that low to mid single digits as you've seen most of the past 12 months. Thanks. Yeah, no. You I think you have it exactly right.

Donald J. Zurbay: I mean, that's kind of how we're looking at our performance in the market. And we look at the market that way. And we're just trying to take a fairly cautious outlook on that recovery. All right, fair enough. And then, Don, I think you've had, you know, three leaders at the dental business here over the last five years. Presumably, we'll be getting a fourth one here at some point down the road.

Speaker Change: Yes, no I think you have it exactly right I mean, that's that's kind of how we're looking at our on our performance in the market and we look at the market that way.

John Wright: And we're just trying to take a fairly cautious outlook on that recovery. All right, fair enough. And then, Don, I think you've had, you know, three leaders at the dental business here over the last five years; presumably, we'll be getting a fourth here at some point down the road. And so I guess just, you know, some little more change or a little more turnover than we're used to seeing, kind of leading up some of these businesses. So just wondering, kind of what's been the underlying issue there? How are you viewing kind of the long-term stability or hopeful stability of that position going for?

Speaker Change: Just trying to take a fairly cautious outlook on.

Rick: On that Rick.

Rick: Recovery.

Speaker Change: Alright fair enough and then Don I think you said.

Speaker Change: Three leaders at the dental business here over the last five years, presumably will be giving a fourth here.

Speaker Change: At some point down the road and so I guess, just some little more change or a little more turnover than we're used to seeing kind of a leading up some of these businesses. So just wondering kind of what's been the underlying issue there or how are you dealing kind of a long term stability or hopeful stability of that position going forward. What are you looking for in a new leader there just any thoughts on the dental.

Donald J. Zurbay: So, I guess just, you know, it's a little more change or a little more turnover than we're used to seeing kind of leading up some of these businesses. So, I was just wondering kind of what's been the underlying issue there? How are you viewing the kind of long-term stability or hopeful stability of that position going forward? What are you looking for in a new leader there? Just any thoughts on the dental side of leadership? Thanks.

John Wright: What are you looking for in a new leader there? Just any thoughts on the dental side of the leadership side? Yeah, well, and appreciate the question, Jeff. I think, you know, there's always, these are always tough, and there's always multiple factors involved in terms of each individual situation. But I would say, you know, when I look at this, obviously this is a key role for our company. You know, as we sit here today, one of the things I just let everybody know is, you know, we have a great dental team. So we have full confidence in the team that's here.

Speaker Change: The leadership.

Donald J. Zurbay: Yeah, well, and I appreciate the question, Jeff. I think, you know, there's always these that are always tough, and there's always multiple factors involved in terms of each individual situation.

Speaker Change: Yeah, well and I appreciate.

Jeffrey D. Johnson: The question, Jeff I think.

Speaker Change: There is there's always these are always tough and there's always multiple factors involved in terms of each individual situation, but I would say when I look at this.

Donald J. Zurbay: But I would say, you know, when I look at this, obviously, this is a key role for our company. You know, as we sit here today, one of the things I just want everybody to know is that we have a great dental team. So we have full confidence in the team that's here. I think, in terms of a leader and how we move forward, we have a lot of plans; we have a lot of good strategies in terms of our dental business. And when I look around at a leader and think about, you know, what are we thinking about?

Speaker Change: Obviously this is a key role for our company.

Speaker Change: As we sit here today one of the things.

Speaker Change: Let everybody know as you know, we we have a great dental team.

Speaker Change: So we have full confidence in the team that's here.

John Wright: I think in terms of a leader and how we move forward; we have a lot of plans. We have a lot of good strategies in terms of our dental business. And when I look at a leader and think about, you know, what are we thinking about? We're looking at somebody that can be aligned or is aligned, and that can execute on where we want to be in the future. Not necessarily where we are right now, and the road map to get there. And so that's going to be the most important thing. I think beyond that, you know, I believe strongly in the culture at Patterson.

Speaker Change: I think in terms of a leader in how we move forward.

Speaker Change: We have a lot of plans we have a lot of good strategies in terms of our dental business and when I look about look at our leader and think about what are we thinking about.

Donald J. Zurbay: We're looking for somebody that can be aligned with, or is aligned with, and that can execute on where we want to be in the future, not necessarily where we are right now, and the roadmap to get there. And so that's going to be the most important thing. I think beyond that, you know, I believe strongly in the culture at Patterson. Each of our businesses has its own unique culture. And I'd say there's been an overarching culture that is strong.

Speaker Change: We're looking at somebody that can be aligned or is aligned.

Speaker Change: And they can execute on where we want to be in the future not necessarily where we are right now and in the roadmap to get there.

Speaker Change: And so that's going to be the most important thing I think beyond that.

Speaker Change: I believe strongly in the culture at Patterson.

John Wright: Each of our businesses has their own unique culture, and I say there's been an overarching culture that is strong. It's been, I think, an advantage for us. And so, you know, I also want to make sure that, you know, we have a leader that's going to honor that, maintain that culture, and really keep that competitive advantage here. So I'd say those are the things that I'm focused on in terms of where we go now. Thank you.

Speaker Change: Each of our businesses has their own unique culture, and I would say theres been an overarching culture that that is strong.

Donald J. Zurbay: It's been, I think, an advantage for us. And so, you know, I also want to make sure that, you know, we have a leader that's going to honor that, maintain that culture, and really keep that competitive advantage here. So I'd say those are the things that I'm focused on in terms of where we go now. Thank you. Your next question comes from the line of Aaron Wright from Morgan Stanley. Your line is open.

Speaker Change: I think an advantage for us.

Speaker Change: So.

Speaker Change: I also want to make sure that.

Speaker Change: We have a leader that's going to honor that maintain that culture and really keep that competitive advantage. There. So I'd say those are the things that I'm focused on.

Speaker Change: In terms of where we go now.

Speaker Change: Thank you.

Aaron Wright: Your next question comes from a line of Aaron right from Morgan Stanley. Your line is open. I'm on the back of that question, just in terms of where you go now. I'm Capital deployment. Has there been any change in how you're thinking about M&A or the M&A pipeline and capital deployment priorities just more broadly. It just seems to focus seems to be just still leaning more on the UK and excited and just opportunities you see out there has any part of your philosophy change at all. Thanks. No, I don't think the philosophy has changed, and I think, as you know, we move forward.

Speaker Change: Your next question comes from the line of Erin Wright from Morgan Stanley. Your line is open.

John M. Wright: On the back of that question, just in terms of where you are now, on capital deployment, has there been any change in how you're thinking about M&A or the M&A pipeline and capital deployment priorities? Just more broadly, it just seems the focus seems to be still leaning more on the organic side and just opportunities you see out there. Has any part of your philosophy changed at all? No, I don't think the philosophy has changed.

John M. Wright: And on the back of that question just in terms of where you go now on capital deployment and has there been any change in how you're thinking about.

M&A or the M&A pipeline and your capital deployment priorities just more broadly just because it seems to be just still leaning more on the organic side and you can just opportunities you see out there has any part of your philosophy changed at all thanks.

Donald J. Zurbay: And I think as we move forward, we would like to look at maintaining that philosophy, maybe accelerating where that philosophy is, but really no change in what we're trying to do. I think, I think the other thing that gets lost in this type of conversation is just all the investment we're making internally. You know, so we look at investment, I look at investment, we look at investment, as, you know, internal and external and kind of what's the best use of the capital because we have a lot of good things internally we're doing as well. But no change.

Speaker Change: No I don't think the philosophy has changed and I think as you know we move forward.

Kevin Caliendo: You know we would like to look at, you know, maintaining that philosophy, maybe accelerating kind of where that philosophy is. in, but really no change in what we're trying to do. I think the other thing that gets lost in this type of conversation is just all the investment we're making internally. So we look at investment, I look at investment, we look at investment as, you know, internal and external kind of what's the best use of the capital because we have a lot of good things internally we're doing as well, but no change. Okay. Thanks. And then on the animal health side, can you speak a little bit about the opportunity and you kind of spoke to this earlier a little bit, but just adding some of these new categories and product lines, especially across areas like dermatology, a billion dollar category and some other areas as well that are coming down the pipe, like how does that kind of underscore your value proposition, especially as the animal health being a factor or landscape gets more innovative and more competitive, especially as we go into the second half of the calendar year.

Speaker Change: We would like to look at.

Speaker Change: Maintaining that philosophy.

Speaker Change: Maybe accelerating.

Speaker Change: Kind of where that philosophies, Ben but really no change in what we're trying to do I think.

Speaker Change: The other thing that gets lost in this type of conversation is just all the investment we're making internally.

Speaker Change: So we look at investment.

Speaker Change: I look at investment we look at.

Speaker Change: Investment is.

Speaker Change: As you know internal and external and kind of what's the best use of the capital.

Speaker Change: Because we have a lot of good things internally, we're doing as well so but no change.

Kevin Barry: Okay, thanks. And then on the animal health side, can you speak a little bit about the opportunity, and you kind of spoke to this earlier a little bit, but just adding some of these new categories and product lines, especially across areas like dermatology, a billion-dollar category, and some other areas as well that are coming down the pipe, like how does that kind of underscore your value proposition, especially as the animal health manufacturer landscape gets more innovative and more competitive, especially as we go I mean, how can you leverage that and get some better economics from some of your vendor partners in that sort of environment? Yeah, hi Aaron, Kevin.

Speaker Change: Okay. Thanks, and then on the animal health side can you speak a little bit about the opportunity and you kind of spoke to this earlier a little bit, but just adding some of these new categories and product lines, especially across areas like dermatology in billion dollar category in some other areas as well that are coming down the pipe like how does that kind of underscore.

Speaker Change: Your value proposition, especially as the animal happiness, faxer landscapes gets more innovative and more competitive, especially as we go into the second half of the calendar year.

Kevin Caliendo: I mean, how can you leverage that and get some better economics from some of your vendor partners in that sort of environment. Thanks. Yeah, hi, Ian, Kevin, yeah, I'll start. I mean, yeah, yeah, I mean, we think that's right on our wheelhouse of our value proposition. And it's good for us when there's innovation. Obviously, we're our sales team is well equipped to go out and partner with the manufacturer to get, you know, that innovation seeded out in our in the hospitals and. And like you alluded to, competitions could for us to because we know the strength of our customer relationships and our ability to influence influence the hospitals and the veterinarians with the right products.

Speaker Change: How can you leverage that and get some better economic and from some of your vendor partners and that sort of environment.

Kevin Barry: Yeah, I'll start. I mean, yeah, yeah. I mean, we think that's right in our wheelhouse of our value proposition. And it's good for us when there's innovation. Obviously, our sales team is well-equipped to go out and partner with a manufacturer to get that innovation seeded out in the hospitals, and like you alluded to, competition is good for us, too, because we know the strength of our customer relationships and our ability to influence the hospitals and the veterinarians with the right products. And so we're excited about the innovation that's coming, and George and his team are working closely with those manufacturers. You alluded to dermatology.

Kevin: Yeah, Hi, it's Kevin I'll start I mean, yeah, Yeah, I mean, we think that's right in our wheelhouse of our value proposition.

Kevin: And.

Kevin: It's good for us when there is innovation I'm. Obviously, we are our sales team is well equipped to go out and partner with a manufacturer to get that innovation seeded out in and are in the hospitals.

Kevin: And thank you alluded to competition is good for us too because we know the strength of our customer relationships and our ability to influence.

Kevin: In Florida, the hospitals veterinarians with the right products. So so yeah. So we're.

Kevin Caliendo: And so, so yeah, so we're excited about the innovation that's coming. And, you know, our George and his team are working closely with those manufacturers. You alluded to your mythology. That's something we're watching here for the year. But it's something we're in contact conversation with the manufacturers on. And we're well equipped for this. So I think this kind of thing for us is something that we think is going to play out of the advantage. Okay, great.

Kevin: We're excited about the innovation that's coming.

Kevin: And you know our George and his team are.

Kevin: Working closely with those manufacturers.

Kevin: Dermatology, that's something we're watching here for the year.

Kevin Barry: That's something we're watching here for the year, but it's something we're in constant conversation with the manufacturers about. And we're well-equipped for this, so I think this kind of thing for us is something. [inaudible] Okay, great, thank you. Your next question comes from the line of Michael Cherny from Leering Partners. Your line is open. Good morning, guys. Maybe I'll start.

Kevin: But it's something we're in constant conversation with the manufacturers on and we're well equipped for this so I think this kind of thing for US is something that we think is going to play out as an advantage.

Speaker Change: Okay, great. Thank you.

Michael Cherny: Thank you. Your next question comes from a line of Michael Cherney from Learning Partners. Your line is open. Good morning, guys. I guess I just have one follow-up related to everything else. Starting dental equipment, Dawn, you mentioned the dynamics of no huge innovation you're expecting this year. As you think about the breakdown of what embedding guidance, how do you see the market dynamics on growth has been a lot of concerns over underlying growth and various different areas of both high tech and basic. You have talked about the challenging comp the start of the year. What does it mean, though, for the rest of the year in terms of core market growth and the visibility you have, whether through backlog.

Speaker Change: Your next question comes from the line of Michael Cherny from Leerink Partners. Your line is open.

Michael Aaron Cherny: Good morning, guys I guess I just have one.

Speaker Change: Follow up related to everything else you've missed touring dental equipment.

Don: Don you mentioned the dynamics of no huge innovation, you're expecting this year as you think about the breakdown of what's embedded in guidance. How do you see the market dynamics and growth has been obviously a lot of the concerns over underlying growth in various different areas of both high Tech and basic.

You have talked about the challenging comp at the start of the year what does it mean, though for the rest of the year in terms of core market growth and the visibility you have whether it's through backlog.

Kevin Caliendo: Through other conversations into where the general equipment growth should. Well, maybe I'll start on Kevin has me comments, but you know, we look at all these factors when we try to thank the market. As you all know, it's a very market. So that's difficult. We do have visibility to some extent and just on some tail to what's in the pipeline in terms of orders. Obviously, but you know, in terms of innovation, innovation common was really more, you know, that's kind of where we've been. We have again some visibility there as well clearly, but you know, my point is that that's been the history here recently, and, you know, we'll see where that takes us as we get toward maybe the back half of the year.

Two other conversations into where the general equipment growth should be over the course of the year.

Don: Yeah.

Michael Aaron Cherny: I don't know if Kevin has any comments, but, you know, we look at all these factors when we try to peg the market. As you all know, it's a volatile market, so that's difficult. We do have visibility to some extent and on some level to what's in the pipeline in terms of orders, obviously, but, you know, in terms of innovation, the innovation comment was really more, you know, that's kind of where we've been.

Speaker Change: Maybe I'll turn it over to Kevin has any comments, but we look at all these <unk>.

Factors.

Speaker Change: When we try to peg the market as you all know.

Speaker Change: It's a variable market so that's difficult.

Speaker Change: We do have visibility to some extent in.

Speaker Change: Some tail to to what's in the pipeline.

Speaker Change: In terms of orders obviously, but.

Speaker Change: In terms of innovation.

Speaker Change: <unk> comment was really more you know that's kind of where we've been.

Michael Aaron Cherny: We have, again, some visibility there as well, clearly, but, you know, my point is that that's been the history here recently and, you know, we'll see where that takes us as we get toward maybe the back half of the year, but as we start the year, you know, that's still something that's hampering the market just a bit. And I think maybe what I just add is that, you know, when we look at our equipment business, there's also, you know, a kind of a replacement cycle that our sales force will attune to that's going to help, you know, make sure that we're there, we've got the right promotions.

Speaker Change: We have again, some visibility there as well clearly but.

My point is that that's been the history here recently.

Speaker Change: We'll see where that takes us as we get towards maybe the back half of the year, but but as we start the year Thats still something thats temporary and the market just a bit.

Kevin Caliendo: But as we start the year, you know, that's still something that's hampering the market just a bit. and I think maybe what I'd just add is I think, you know, when we look at our equipment business, you know, there's also, you know, kind of a replacement cycle that our sales force will attune to that's going to help, you know, make sure that we're there. We've got the right promotions and, you know, certain times of the year we do financing offers and things like that to drive demand, make sure that, you know, even without necessarily a tailwind from innovation, we've got the team up there that's really good at making sure the practices know when it's time to invest and how to get a good return on those investments.

Speaker Change: Yes, I think maybe what I'd just add is I think when we look at our equipment business.

Speaker Change: There's also a.

Speaker Change: Kind of a replacement cycle that are our sales force is well attuned to that's going to help make sure that we're there we've got the right promotions in.

Speaker Change: Yeah.

Michael Aaron Cherny: At certain times of the year, we do financing offers and things like that to drive demand to make sure. You know, even without necessarily a tailwind from innovation, we've got the team out there that's really good at making sure the practices know when it's time to invest and how to get a good return on those investments. No, no, no balance sheet impact other than just the earnings flow through from it.

Speaker Change: Certain times of the year, when you're financing offers and things like that to drive demand to make sure of that.

Speaker Change: Even without a necessarily a tailwind from innovation.

Speaker Change: We've got the team out there that's really good at making sure. The practices you know what it is.

Speaker Change: Time to invest and how to get a good return on those investments in their equipment.

Michael Cherny: One more really quick modeling question, talk about the change impact on the income statement beyond the flow through any dynamics and the balance sheet that we think about in terms of the change hit both in the quarter as well as the 25. No, no, no, no balance sheet impact of it than just the earnings flow through from it, Michael. Awesome, thanks.

Speaker Change: I think just one more really quick modeling question talked about the change impact on the income statement beyond the flow through any dynamics on the balance sheet that we should think about in terms of change here both in the quarter as well as at the 25.

Speaker Change: No no no balance sheet impact other than just the earnings flow through from that Michael.

Speaker Change: Awesome. Thanks.

Speaker Change: Yeah.

Jonathan Block: And your final question comes from a line of Jonathan Block from Steeple. I'm sorry; will not be the final question. It is from Jonathan Block from Steeple. Your line is open. Okay, great. Thanks. Good morning, guys. I'll clean up a little bit. Kevin, sorry if I miss it, but with the fiscal 25 ohms expected to be flat year over year. Just trying to sort of tease that out a little bit. Is that reflecting caught maybe some gross margin expansion, more in the back part of the year due to the year of your change comp. But then maybe some up XD leverage due to the ongoing investments.

Jonathan David Block: And your final question comes from the line of Jonathan Block from Stiefel. I'm sorry, it will not be the final question. It is from Jonathan Block of Stiefel.

Speaker Change: And your final question comes from the line of Jonathan Block from Stifel. I'm, sorry, we will not be the final question.

Speaker Change: It is from Jonathan block from Stifel. Your line is open.

Jonathan David Block: Your line is open. Okay, great. Thanks. Good morning, guys.

Kevin Barry: I'll clean up a little bit. Kevin, sorry if I missed this, but with the fiscal 25 OMs expected to be flat year over year, just trying to sort of tease that out a little bit. Is that reflecting, call it maybe some gross margin expansion more in the back part of the year due to the year over year change comp? But then maybe some OPEXD leverage due to the ongoing investments. Maybe if you can just talk about that, and then I'll ask a quick follow-up question. No, I think you got it right.

Jonathan David Block: Okay, great. Thanks, good morning, guys.

Kevin: Up a little bit Kevin sorry, if I missed this but with the fiscal 'twenty five <unk> expect it to be flat year over year, just trying to sort of tease that out a little bit is that reflecting call. It maybe some gross margin expansion more in the back part of the year due to the year over year change comp.

Speaker Change: But there may be some opex deleverage due to the ongoing investments maybe if you can just talk to that and then I'll ask a quick follow up.

Kevin Caliendo: Maybe you can just talk to that and ask a quick follow-up. No, you got it right. You know, we expect that we get some deal. You know, typically we, you know, we see out margins and prove as the year goes on generally from some mix of business that have falls with our suit and alley as well as just leverage. So Q1, we're going to have, you know, usually have our lowest O.M. Porter and Q1 from that. It's going to be exacerbated a little bit this year because of that change dynamic, and it will. But then we'll have a favorable comment and full of the help.

Kevin Barry: You know, we expect that, you know, we get some dealer orders, typically we, you know, we see our margins improve as the year goes on, generally from, you know, some mix of business that evolves with our seasonality, as well as just leverage. So Q1, we're going to have, We usually have our lowest OM quarter in Q1 from that dynamic. It's going to be exacerbated a little bit this year because of that change dynamic, and it will, but then we'll have a favorable comp there.

Speaker Change: No you got it right okay.

Speaker Change: We expect that we get some dealer typically.

We see op margins improve as the year goes on generally from some mix of business that it falls by seasonality as well as <unk>. So Q1, we're going to have.

Speaker Change: We usually have our lowest quarter in coupon from that dynamic it's going to be exacerbated a little bit this year because of that change dynamic and it will.

Speaker Change: But that will have a favorable comp there and keep all of that helps us a bit.

Kevin Caliendo: It's, I would add, you know, we're balancing. John, the investment we want to make with margin expansion. So, so there's a little bit of that in there and obviously, you know, as sales improvement and to the extent they're sales are above our expectations, that's going to be a big leveraging point potentially. Understood. And then, you know, color, you can give on trends of late. I mean, you know, general just been under a lot of pressure, all stocks. Hopefully yours is going to be under less pressure today. You would think, but, you know, can you talk to the trends of late anything specific to April, May, any color around patient traffic versus maybe some more discretionary items. I think that would be helpful.

Donald J. Zurbay: But I would add, you know, we're balancing, uh, uh, John, the investment we want to make with margin expansion. So, there's a little bit of that in there. And obviously, you know, as to the extent their sales are above our expectations, that's gonna be a big leverage. Okay. You know, Don, any color you can give on trends of late?

Speaker Change: With that I would add we're balancing.

Speaker Change: John.

John M. Wright: The investments, we want to make with with margin expansion. So so theres a little bit of that in there and obviously.

John M. Wright: As sales.

John M. Wright: Sales improve and.

John M. Wright: To the extent there sales at or above our expectations, that's going to be a big leveraging point potentially.

Speaker Change #100: Understood and then.

Speaker Change #101: You got any color you can give on trends of late I mean.

Donald J. Zurbay: I mean, you know, Dental's just been under a lot of pressure, all stocks, so hopefully yours is gonna be under less pressure today, you would think. But, you know, can you talk about the trends of late, anything specific to April, May, any color around patient traffic versus maybe some more discretionary items? Anything you got would be helpful.

Speaker Change #102: Dental has just been under a lot of pressure all stock. So hopefully years, there's going to be under less pressure today, you would say, but.

Speaker Change #103: Can you talk to the trends of lead anything specific to April may.

Any color around patient traffic versus maybe some more discretionary items anything we garner it would be would be helpful. Thanks, guys yeah.

Donald J. Zurbay: Thanks, guys. Yeah. I'd say that, uh, it sounds a bit like a broken record here, you know, but again, I think, you know, when we look at the consumables market in dental, the traffic's been steady. You know, I think there's not a lot there.

John Stansel: Thanks. Yeah. You know, I'd say that. You know, it sounds a bit like a broken record here. But, but again, I think we look at the consumables market and dental; the traffic's been steady. I think there's there's not there's not a lot there. And then I think what's lost in our story again, you know, not to put on this, but is the continued excellent performance in both of our animal health segments, particularly on the bottom line. And so, you know, our story has a lot that there's a lot of positives here that you were focused on.

Speaker Change #104: I'd say that.

Speaker Change #104: It sounds a bit like a broken record here.

Speaker Change #105: But again I think we look at the consumables market in dental the traffic's been steady.

Speaker Change #105: Theres not theres not a lot there.

Donald J. Zurbay: The, and then I think what's lost in our story, again, not to harp on this, but, is the continued excellent performance in both of our animal health segments, particularly on the bottom line. And so, you know, our story has a lot, there are a lot of positives here that, you know, we're focused on. I think, again, what we're looking for is, and it will be, the equipment business to get better. We're going to be perfectly well positioned at that point to take advantage of that.

Speaker Change #105: And then I think was lost and restored again not to harp on this but the.

Speaker Change #105: Is is the continued excellent performance in both of our animal health segments is pretty here on the bottom line.

Speaker Change #105: And so you know our story has a lot there's a lot of positives here that we're focused on I think again, what we're what we're looking for is and it will.

John Stansel: I think again, what we're what we're looking for is and it will. The equipment business, to get better, we're going to be perfectly well positioned at that point to take advantage of that. And then investments we're making in technology software, some of the things we talked about today driving that value-added services. Line Item. And so if you really get into it, it gets down to just the equivalent market and that improving, but the rest of the businesses, the P&L, from that standpoint, would be good. And so I think that's kind of our go-forward view. I think maybe it's lost a little bit in all the focus on equipment.

Speaker Change #105: The equipment business.

Speaker Change #105: Better.

Speaker Change #105: We're going to be perfectly well positioned at that point to take advantage of that and then the investments we're making in technology software. Some of the things we talked about today driving that value added services.

Speaker Change #105: A line item and so if you really get into it it gets down to just the equipment market and that is improving.

Speaker Change #105: But the rest of the rest of the businesses the P&L from that standpoint, it wasn't good and so I think that's kind of our go forward.

Speaker Change #105: I think maybe gets lost a little bit in all the all the focus on equipment.

Speaker Change #105: Yes.

Operator: Thank you.

Speaker Change #106: Thank you.

Jason Bednar: Okay, we have time for one final question, and that question comes from line of Jason Bednar from Piper Sandler. Your line is open. Hey, good morning. Thanks for squeezing me in here. Donald wanted to start. I'm trying to square the direction of margins relative to what you're posting for consumables growth in your two segments. Animal growth has been fine. Margin is pretty solid. Donald consumables has been surprisingly good, but operating margins have been going the wrong direction and really I think opposite to what conventional thinking would suggest when consumables are strong. So I guess the question is why isn't that Donald consumables performance translating to better margins for that franchise?

Donald J. Zurbay: And then the investments we're making in technology, software, some of the things we talked about today, driving that value-added services line item. And so, if you really get into it, it gets down to just, you know, the equipment market and that improving. But the rest of the businesses, the P&L, you know, from that standpoint, it was good. And so, I think that's kind of our go-forward view that, I think, maybe gets lost a little bit in all the focus on equipment. Thank you. We have time for one final question, and that question comes from a line by Jason Bednar from Piper Sandler. Your line is open. Hey, good morning.

Speaker Change #107: Okay. We have time for one final question and that question comes from the line of Jason Bednar from Piper Sandler Your line is open.

Speaker Change #106: Okay.

Jason M. Bednar: Thanks for squeezing me in here, Don. I wanted to start by trying to square the direction of margins relative to what you're posting for consumables growth in your two segments. Animal growth has been fine, and margins are pretty solid. Dental consumables have been surprisingly good, but operating margins have been going the wrong direction. And really, I think this is opposite to what conventional thinking would suggest when consumables are strong.

Speaker Change #108: Hey, good morning, Thanks for squeezing me in here.

Don: Don I wanted to start I'm trying to square the direction of margins relative to what you are posting for consumables growth in your two segments animal growth's been fine margins pretty solid.

Jason M. Bednar: Dental consumables has been surprisingly good but operating margins as they go in the wrong wrong direction, and really think opposite to what conventional thinking would suggest when consumables are a strong. So I guess the question is why isn't that dental consumables performance translate into better margins for that franchise.

Kevin Barry: So I guess the question is, why isn't that dental consumables performance translating to better margins for that franchise? Maybe it'd be helpful if you could quantify some of those software investments you've referenced, so we can get a better sense of underlying margins and give you credit for that core profitability, which is like I can start docking at a cup. I mean, from a consumables margin standpoint. You know, I think you're correct that, from a gross margin standpoint, you know, that's. We also did have a one-time gain a year ago in Q4 related to an asset sale that was worth a bit in dental that helped that we're comping over here in Q4.

Kevin Caliendo: Maybe it'd be helpful if you quantified some of those software investments you've referenced, so we can get a better sense of underlying margins and give you credit for that core profitability. I can start not going to add anything. I think from a consumables margin standpoint, I think you're correct that from a gross margin standpoint, that's about average, slightly accretive to our portfolio and the dental business. I think what you're seeing in the year-term years, one is because you're in Q4. We keep bringing up CHL care, but that was a very profitable part of our business that was disrupted here in Q4.

Speaker Change #110: Maybe it'd be helpful. If you could quantify some of those software investments you've referenced so we can get a better sense of underlying margins and give you credit for that core profitability.

Speaker Change #110: Okay.

Speaker Change #111: Start and Don can add any color I mean, I think from a for.

Speaker Change #111: Consumables margin standpoint.

Speaker Change #111: You know I think.

Speaker Change #112: You're welcome.

Speaker Change #112: You're correct that from a gross margin standpoint.

Speaker Change #112: About average slightly accretive to our portfolio in the dental business I think what youre seeing in the near term here is one is because here in Q4, and I keep bringing up change health care, but that was a very profitable part of our business that.

Speaker Change #112: What's disrupted here in Q4, so that was a significant gross margin drag for us here in the quarter.

Kevin Caliendo: So that was a significant gross margin to drag for us here in the corner. As we look at margins for dental, then going to the bottom line, we have the software investments here over here. That's a drag. We also did have a one-time gain a year ago in Q4, related to an asset sale that was worth a bid and dental that helped that we're copying over here in Q4. So there's a couple of specific dynamics here. I think to your broader question around how do we see margins for the dental segment going forward? We'll start copying over some of the software investments.

Speaker Change #112: As we look at margins for dental then going to the bottom line you're right. We have the software investments year over year, that's a drag.

Speaker Change #112: Also did have a onetime gain a year ago in Q4 related to an asset sale that was worth about that at all that that helped that we're comping over here in Q4. So there's a couple of specific dynamics here I think to your broader question around how do we see margins for the dental segment going forward.

Kevin Barry: So there are a couple of specific dynamics here. I think to your broader question around how do we see margins for the dental segment going forward, one, we'll start comping over some of the software investments. That'll be less of a slight headwind year over year here early in the year, but less so than it was this past year.

One we will start comping over some of the software investments that we have less could be a slight headwind year over year here early in the year, but less so than it was this past year.

Kevin Caliendo: That'll be less to be a slight headwind year over here early in the year, but less so than it was last year. And as we do continue to see the consumables strengths, if that continues, and we continue on the trend that we're out with from market share standpoint, I would expect that to flow through the margin expansion. That's still definitely part of our business model. Okay, very helpful. And then just maybe a clarifying question, Kevin. I think you said the assumptions for share accounts to be down year over year. I think that probably goes about saying how active you've been buying back your stock the past 12 months.

Kevin Barry: And as we do continue to see the consumables strength, you know, if that continues and we continue on the trend that we're on from a market share standpoint, I would expect that to flow through to March. You know, that's still definitely part of our business model. Okay, very helpful. And then maybe a clarifying question, Kevin, I think you said the assumptions for the share count to be down year over year.

Speaker Change #112: And yes, we do continue to see the consumables strength if that continues and we continue on the trend that we're addressing from a market share standpoint, I would expect that to flow through to margin expansion.

Speaker Change #112: That's still definitely part of our business model.

Speaker Change #112: Yeah.

Speaker Change #113: Okay. All right very helpful. And then just maybe a clarifying question Kevin.

I think you said the assumptions for share count to be down year over year, I think that probably goes without saying without active you've been buying back your stock in the past 12 months.

Kevin Barry: I think that probably goes without saying with how active you've been buying back your stock the past 12 months. Can you clarify whether your guidance assumes additional share repurchase activity in fiscal 25? I don't think I heard that comment. Yeah, we're assuming not at the same level that we had here. 24 but, you know, kind of a more balanced return, giving us some flexibility that, like Don said, as the right M&A opportunities come along, we maintain our flexibility to execute on that. But we do assume some level of share counter-repurchases just to kind of stay anti-dilutive, a little more if we see the opportunity.

Kevin Caliendo: Can you clarify whether your guidance assumes additional share purchase activity in fiscal 25? I don't think I heard that comment. Yeah, we're assuming not the same level that we had here in fiscal 24, but kind of a more balanced, you know, return. to giving us some flexibility that, you know, like Don said, as the right M&A opportunities come along, we maintain our flexibility to execute on that. But we do assume some level of ShareCon repurchases, just to kind of stay anti-deludive and maybe a little more if we see the opportunity. Okay, make sense. Thank you.

Speaker Change #114: Can you clarify whether your guidance assumes additional share repurchase activity in fiscal 'twenty five I don't think I heard that comment.

Speaker Change #115: Yes, we are assuming not the same level that we had here in fiscal 'twenty, four but kind of.

Speaker Change #116: More balanced return to them.

Speaker Change #116: Giving us some flexibility of that.

Speaker Change #116: That said, if the right M&A opportunities come along we maintain our flexibility to execute on that but we do assume some level of loss share.

Speaker Change #116: Repurchases, just kind of stay anti dilutive.

Speaker Change #116: Maybe a little more efficacy the opportunity.

Donald J. Zurbay: Okay, next slide. Thank you. That concludes our question and answer session. Dawn, back over to you. All right, thank you for all your time today and interest in Patterson Companies, and we'll talk to you next quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #117: Okay makes sense. Thank you.

Operator: That concludes our question and answer session. Don, back over to you. Alright. Thank you for all your time today. An interesting pattern, Patterson Companies, and we'll talk to you next quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Dan: That concludes our question and answer session Dan back over to you.

Dan: Alright. Thank you for all your time today and interest in pattern Patterson companies and we'll talk to you next quarter.

Speaker Change #119: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change #119: Okay.

Speaker Change #119:

Speaker Change #119: Yeah.

Speaker Change #119: [music].

Speaker Change #119: Yeah.