Patterson Companies, Inc.

Q4 2021 Earnings Conference Call

6/23/2021

spk_0: the ending of are standing by welcome to the bathroom companies to year drink it going run for larger earnings call at this time all participants are no recent only mode after the speakers presentation to be a question answer session glass aggression during the session you will need to breast or one on your telephone as a reminder these conference is being recorded but anti during the conference you need to reach an operator we stress star general hours now like to turn a covert to mr done right vice president of investor vision you a big insert
spk_1: thank you operator good morning everyone and thank you for participating in paterson company typical twenty twenty one fourth quarter and full year earning africa joining me today or patterson president and chief executive officer mark walter and patterson chief financial officer down survey after a review of the physical funny twenty on fourth quarter and full year result and outlook by management will open the call to your question if the again let me remind you that certain comments made during his conference call are forward looking in nature and select certain risks and uncertainties these factors which could cause actual results to materially differ on those indicated in such forward looking statements are disgusting detail and our point of ten k and are other filings with the security and exchange commission we encourage you to cover review this material in addition comments about the market research including growth rate and market shares are based upon 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 twenty third twenty twenty one patterson undertake no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call also a financial fly presentation can be found in the investor relations section of our website and patterson companies that on please note that in this morning's conference call we will reference are adjusted results for the fourth quarter and full year fiscal twenty twenty one the reconciliation table and our press release is provided for the just reported gap measures namely operating income income before taxes income tax expense net income net income attributable to patterson company thing and deluded deluded earnings per share attributable to paris and company thing for the impact of deal amortization integration and business restructuring expensive legal reserve cause a salary accelerated get related costs discreet act matters investment gain or loss and goodwill impairment along with the related tax effects of these items we will also discussed free cash flow as defined in earnings release which is a non gap measure and use the term internal fails to represent net sales adjusted to exclude the impact of foreign currency and changes and products selling relationship these the and get measures are not intended to be a substitute for a gap result this call is being recorded and will be available for replace starting today ever at eleven am central time for a period of one we now i'd like the hand the call over to mark while shirt thank god and welcome everyone to patterson it's twenty twenty one fourth quarter and pull your earnings conference call
spk_0: we have a lot to discuss on today's call so i wanted to provide an overview of what we plan to cover first i will walk through the highlight of the year across our businesses revived commentary on the performance in each of our stagnant and our perspective on the and market trend that we anticipate will drive our momentum invisible twenty twenty two
spk_1: next i'll turn it over to done to get more detail commentary on the fourth quarter and bowl twenty twenty one physical your financial results as well as the he had pumpkin than input that and on the fiscal twenty twenty who guidance we announced this morning and finally will take your questions as outlined in our press release this morning patterson delivered very strong performance during our twenty twenty one if go year weekend can april twenty four twenty twenty one first of all i wanted to clearly bank and recognize our entire patterson team or successfully navigating the his door challenges posed by the cold uniting pandemic i'm incredibly proud of our team support our customers are industries and our community during that challenging period while at the same time executing our strategy and delivering great results
spk_0: a year ago we've face significant declines in the man across our and market many dental practice were required to close pet owners were forced to delay non essential services and supply chain in the beef and fly markets were heavily disrupted who are commitment to our purpose vision and values or patterson team show the strength of are differentiated value proposition which proved critical to our success throughout the year we stay true to our guiding principles of protected employee health and safety delivering for our customers when they needed of most and doing our part to help reduce the spread of the virus in our communities
spk_1: we also made important and sometimes difficult decisions about managing are caught in our balance he as we navigated a pandemic to help ensure we would emerge and even stronger patterson beyond the commitment of our people in thousand strategy execution or performance in fiscal twenty twenty one reflects the fundamental strength and essential nature of the dental and animal health markets it also reflects patterson enterprise why people get over the last several years to strengthen our poor business operations around failed execute russian operational excellent affected mix management expend discipline and working capital improvement our ongoing improvement in the various enable patterson to deliver strong top and bottom line road and value to our customers and shareholders throughout the fiscal year in summary we delivered full year of difficult twenty twenty one internal fails grow without eight percent compared to physical twenty twenty and go our fourth quarter internal sales by twenty four percent physical twenty twenty one dental segment internal failed increase approximately ten percent over the prior year and physical twenty twenty one animal health segment internal failed increase nearly eight percent over the prior year for the school twenty twenty one year we cheat adjusted earnings at one dollar ninety one cents per diluted share an increase of twenty three percent over physical twenty twenty with like a human strength strengthen our ongoing initiative to deliver improve performance i'm from bar expanding team and patterson's it's cool twenty twenty one result of that i'll briefly coach the drivers of those results and each party movement stagnant starting with them physical twenty twenty one was another storm year for a general business particularly given the unprecedented disruption within the market as a dental market transition from lockdown to recovery patterson to competitive value proposition was on full display
spk_0: from our comprehensive and innovative portfolio products and services local and national customer support and sophisticated software solutions we believe patterson is providing a differentiated customer experience that and helping our customers recovered quickly and drive success in a practices in addition to sourcing and reliably delivering critical infection control products our ability to deliver patterson's broader consumables portfolio in able to enabled us to the top eight the reopening of our customers practices and help them create a safe environment for their patience
spk_1: we believe we continued outperform the market in consumable do we are pleased with our momentum in this category while a significant portion of our fifteen percent consumer mold growth for fiscal twenty twenty one was from the sale of infection control products we delivered approximately six percent year over year field growth in non infection control consumable products we believe that strong i'm a single digit growth is due to the continued investments we've made in our field failed in support of teams which is driving improved execution and market share games during the fiscal twenty twenty one fourth quarter we also continued to see increasing demand for expanding and highly profitable private label portfolio products which once again okay to the growth of the broader consumable category
spk_0: many of our private label products also happened to be in the infection control category which serves as an incremental tailwind for us to continue to drive topline growth and margin improvement
spk_1: our ability to deliver strong private label growth and consumable in the cat for me to our continued focus on this initiative and our investment in expanding our portfolio over the past several years and we're pleased to see the strategic initiatives continue to drive result unequal inside patterson generated nearly eight percent feels girls and fiscal twenty twenty one has offices reopened impatient traffic increase throughout the typical year can his invested in their practices and took advantage of patterson's comprehensive value proposition our team collaborated with our manufacturing partners to develop creative financing strategies education initiative and online events for dental customers we continue to be the partner of choice for new equipment software and technology innovation there are a pandemic our extended network of local field service technicians international support teams that are patterson technology center work together to deliver the unmatched expertise and service our customers expect from patterson our ability to support our customers throughout the entire life cycle of their equipment and technology investment continues to be an important differentiator for patterson as a result we believe we continue to grow ahead of the market in both cork whitman and high tech categories prove that dennis continue to choose patterson when investing in their practices to provide better
spk_2: out care
spk_1: if part of that effort we have also been focused on telling our are higher margin software and you services products patterson currently offers three comprehensive and growing practice management platforms that how our customers with everything from revenue cycle management to practice analytic than inside the patient communication looking forward we are confident with dental market continues to present the tracking growth opportunities for several reasons first we expect to be patient demand levels will continue to increase as progress around vaccine administration will help alleviate any remaining pent up demand and dried patient traffic back to pre pandemic levels second we expect dennis will continue investing in the latest technologies and practice management software to build and moderniser practices third we expected man for infection control products to remain above pre pandemic levels over the long term and dentist and their patient embrace this new standard of care and finally we are encouraged by the heightened awareness that oral health hazard directly to the patients overall health i want to a gaining knowledge and thank the entire dental team for their performance and commitment serving our customers turning out animal health as i mentioned earlier or animal health segment achieve full year internal sales girl nobody percent year over year led by internal sales growth of nearly seventy percent in our companion animal business during physical twenty twenty one in the fiscal twenty twenty one fourth quarter alone oh
spk_0: rural animal health internal sales grew about fourteen percent year over year driven by companion animal internal sales growth of thirty percent
spk_1: across both companion and production our effort have enabled us to outpace armor or and markets and grow are here on the companion by the right and pet ownership and adoption during the pandemic to increase spending veterinary clinic traffic and cut wellness visits our field they things actually executed well on this opportunity contributing to are strong topline result our deep existing relationships with veterinarians and comprehensive offering position as well to support their growth that only by providing a broad array of consumable products but also of in equipment and the latest technologies are spanning portfolio private label product also performed well driving and the fails make while evening our relationships with our customers
spk_0: as veterinary practice is welcomed an influx the new pet owners mid pandemic our practice management software branded mobile app development services and prescription home delivery services enable them to scale and improve their customer experience for example we leveraged are a pet health technology program to
spk_1: send alerts the pet owners with reminders about their vaccine scheduled wellness visit another pet held milestones that you're basically traffic increase demand for supplied and helped pet owners pay grade care of their pants we're proud of our beat value proposition for rent for veterinarians and how patterson continue to be a trusted an indispensable partner to help them succeed given me attractive dynamic and the companion animal market patterson leveraged are strengthened balance sheet of miller that holding a multi regional veterinary distributor be completed the transaction earlier this month we believe miller bet is a strong cultural fit with patterson animal how but complimentary market position in the midwest mid atlantic in south east
spk_0: the transaction is expected to expand our or sales reach drive synergies and more broadly demonstrates patterson focus on making strategic investment to deliver profitable growth and shareholder value we are excited to welcome the talented miller back pain patterson and to build on their legacy of providing exceptional customer service
spk_1: we believe our continued strong performance an investment in the companion animal space position does well for the year ahead
spk_0: while new pet ownership and adoption growth rates will likely stabilize in fiscal twenty two there is now a larger population pet owners and we expect the normalize long term growth rate of the companion animal stagnant to be higher than three pandemic levels and the production animals guy or keen executed well to drive operational improvements and deliver value to our customers
spk_1: although production animal internal failed in fiscal two thousand twenty one were down approximately one percent we are pleased with their performance given a significant pandemic related challenges we faced over the past year our production animal team did an excellent job managing through these historical the nike related challenges and provided our customers would highly specialized service delivery models to support heart health and strength the quality the food supply
spk_0: looking forward to physical twenty twenty two we expect several key factors will enable us to return our production animal business performance back a historical growth levels first is the recovery of the why market which is expected to continue improving in the near term that our customers rebuild their heard and ramp up more significantly in the second half
spk_1: half of the twenty twenty two fiscal year second if the general reopening of economy including restaurant in schools which we anticipate one will create increase demand for protein and dairy products and finally are differentiated value proposition and strong market position give us confidence we can return our production animal business growth in fiscal twenty two to sum it up patterson delivered strong to school twenty twenty one rebels march by outstanding execution in the face of significant uncertainty and challenging and market dynamics and i want to again commander keen for their sustained focus and executing our strategy and serving as the indispensable partner our costs
spk_3: the most depend on for their business success
spk_1: we are confident in paterson strategic positioning and each of our and market and our ability to drive long term value for customers and shareholders and with that i'll turn the call over to down talk about article twenty twenty one full year and fourth quarter performance in detail and speak to the key functions and drivers of the financial giants we announced this morning
spk_0: thank you mark good morning everyone microcode remarks this morning until first covered a financial results for both our fourth quarter of fiscal twenty twenty one which ended on april twenty four twenty twenty one and are full fiscal year due to a significant impact of covert nineteen particularly in the month of march or april of our fiscal twenty twenty or year over year comparisons for fourth quarter results may be difficult to interpret so i would provide some context around these comparisons second i will discover the financial gains we issued for fiscal twenty twenty two and provide additional contact constructions the may be useful to you to assist in your financial models
spk_4: but what do you like covering the results for fiscal twenty twenty one
spk_0: consolidated reporting sales for patterson companies in our fiscal twenty twenty one fourth quarter or one point five six billion increase of twenty one point four percent versus the fourth quarter in one year ago internal fails which are adjusted pretty effective currently translation and change and product selling relationships increase twenty three point five percent compared to the same period last year as mark already mentioned we believe our performance for the fourth quarter as the result of strong failed execution and above market growth in both of our business segments for additional context or fiscal twenty twenty one fourth quarter internal fails girl was eleven point three percent above our fourth quarter twenty nine or last fourth quarter was not impacted by recovered nineteen pandemic for the for fiscal year twenty twenty one consolidator important sales for and companies were were five point nine one billion in increase of seven point seven percent versus the same period one year ago internal failed increased eight point two percent compared to the same period last year
spk_1: or fourth quarter fiscal twenty twenty one adjusted gross margin was nineteen point four percent
spk_0: during the period we recorded to significant adjustments in or dental fragments the negatively impacted are gross profit the first with eleven million of covert related inventory adjustments to account for higher amounts certain infection control inventory where prices have fallen and the impact impacted a pandemic is pampered recent months the fact it was a year and life for just hundred which negatively impacted are gross profit by twelve million dollars in our dental segment the significant life or adjustment was almost entirely due to the coded related pricing dynamics and variability infection control products during the year taken together peter jackson's negatively impacted are gross margin and operating margin by nearly one hundred and fifty basis points in the fourth quarter of fiscal twenty twenty one
spk_3: for the full fiscal year twenty twenty one which included the inventory adjustment i just described are just gross margin was twenty point four percent
spk_0: adjusted operating expenses as a percentage of net sales for the fourth quarter of fiscal twenty twenty one or sixteen point four percent as we continue to benefit from ongoing expense discipline and leveraging our costs structure of or higher sales volumes but a full fiscal year twenty twenty one adjusted operating expenses and the percentage net sales were sixteen point one percent compared to seventeen point six percent in fiscal two thousand and twenty every reminder er to hear twenty twenty one operating expenses benefited by approximately fifteen cents per share from salary reductions has furlough activities in the first quarter of fiscal year be specific pandemic related actions favorably impact are adjusted operating expenses as a percentage of know trails and operating profit margin for the full year by forty basis points america little fourth quarter or consolidated adjusted operating margin was a three point one percent and i previously mentioned are operating margin in the fourth quarter was negatively impacted by nearly one hundred and fifty basis points as a result of cold and related inventory adjustments for the full fiscal year are consolidated adjusted operating margin was four point two percent we expect to drive continued operating margin improvement through our efforts on expense discipline makes management and ongoing spent by merging as we continue to grow the top why or just a tax rate for the physical physical fourth quarter was twenty one point zero percent and for the full year was twenty two point six percent retorted net income attributable to patterson company's paying for the fourth quarter of fiscal twenty twenty one was twenty eight point eight million or thirty cents per diluted share it's compares to a report a net loss attributable to and companies and of six hundred and eight point six million or strict hours and forty four cents per diluted share in the fourth quarter of physical twenty twenty and he recalled in the fourth quarter of fiscal twenty twenty we booked a goodwill impairment charge related to our animal health pregnant adjusted net income attributable to patterson companies and in a physical fourth quarter of fiscal twenty twenty one was thirty eight times per diluted share as a reminder adjusted net income excludes deal amortization integration and business restructuring expensive legal reserve costs accelerated that costs screen caps matters investment gain or loss in and good impairment along with the related to catch a factor these items this compares to forty one point one million or forty three cents per share in the fourth quarter of fiscal twenty twenty the after that impact on the cold related a mentor adjustments for certain infection control products and life though was approximately eighteen point two million or nineteen cents per share diluted share an impact in both and reporting net income and the adjusted net income for the fourth quarter of fiscal twenty twenty one now what colonel or business segments starting with our dental business in the fourth quarter of fiscal twenty twenty one internal sales for a gentle business increased forty nine point one percent compared to the fourth quarter of fiscal twenty twenty as you recall the dental fragments tales performance for the fourth quarter of fiscal twenty twenty was severely impacted by the eighty a recommending a dental offices shut down and perform only emergency dental care for approximately half of that order for some additional contact dental internal fails for the fourth quarter circle twenty twenty one hour up nearly ten percent compared to the fourth quarter of fiscal twenty nine nineteen or fourth quarter sales performance was driven by stronger than forecast growth in our consumable equipment and software and value added certain categories for the full fiscal year internal fails for a dental business where i'm ten point four percent of fiscal twenty twenty fourth quarter internal failed of consumable temple supplies were i'm fifty three point one percent versus the fourth or the prior year it's included growth in infection control products and on infection control products for the full year internal failed considerable dental supplies were i'm fourteen point nine percent versus fiscal twenty twenty internal failed of equipment in the fiscal fourth quarter increased sixty three point zero percent versus the same for a year ago for the full year internal fail to become aware of seven point six percent versus fiscal twenty twenty finally internal failed of software and value added servicers increased twelve point five percent the physical force or compared to the fourth quarter of fiscal twenty twenty adjusted operating margin in dental work five point zero percent in the fiscal fourth quarter we call it related inventory judgment by proves he outlined negatively impact your operating margin in the dental pregnant by approximately three hundred and eighty basis points in the corner adjusted operating margins in dental for the full fiscal year where eight point nine percent or twenty basis point improvement over physical twenty twenty
spk_4: now let's move on to or animal how segment
spk_0: during a fiscal fourth quarter internal sales for animal hospitals were on thirteen point eight percent compared to the same period a year ago increase of kind of options and the increased attention to patch and positively impact the companion animal market not companion animal team delivered outstanding sales girl from the fiscal fourth quarter of twenty twenty one of twenty nine point six percent compared to the same period fiscal twenty twenty for the full year internal sales growth in our animal health business was up seven point seven percent compared to fiscal year twenty twenty brown brownlow help team continued to successfully dry fire sales growth with vendor partners for rewarded for value added approach to both are companion and production animal customers and our team also delivered improve product next with stronger sale the private label products equipment and software adjusted operating margin their animal whole thing or four point four percent in the fiscal fourth quarter a slight decrease of can basis points compared to the fourth quarter of the prior year adjusted operating margin in the segment for the full year or three point five percent
spk_1: now let me covered flow on balance sheet items
spk_0: during the full year of fiscal twenty twenty one we use seven hundred and thirty point five million in cash from operating activities we also collected different purchase price receivables eight hundred and thirty four million during the year which is included in investing activity section of the cash flow statement the fully understand or free cash flow the total of these two miles represents a generation of cast for the full fiscal year one hundred and three point five million free cash flow which we have explained in in a table with and our press release decreased one hundred and forty eight point nine million during the school twenty twenty one compared to the same period one year ago he year over year decreases primarily due to elevated levels of accounts payable at the beginning of the fiscal year due to call with nike as we carefully managed our cash and economy recovered our accounts receivable accounts payable and working capital returned to non pandemic levels during the fourth quarter of fiscal twenty twenty one we generated sixty nine point one million free cash flow turning the capital allocation we continue to execute on our strategy to return castro shareholders and the fourth quarter of fiscal twenty twenty one who declared a quarterly cash given and of twenty six cents per diluted share which has been paid in the first quarter of fiscal twenty twenty two during circle twenty twenty one catterson return seventy five point two million in cash dividend to our shareholders
spk_4: are born continue to be are given and as an important component of returning values or shareholders and the current dividend yield provides a meaningful baseline return to shareholders as we continue focusing on our plans to drive improve performance in the business
spk_0: let me conclude with some comments i'll look for fiscal twenty twenty two this morning we issued gap earnings guidance of one dollar sixty one to one dollar seventy six per diluted share and adjusted earnings guidance of one dollar ninety to two dollars and five cents per diluted share it's represents the first time we've given earnings guy and since the occurrence of the pandemic due to the uncertainty surrounding it's impact on our business and market while we have greater clarity on the impact of a pandemic your recovery from uncertainty still exist as a result we have broadened are you guys range to fifteen sounds for modeling purposes let me highlight some of the factors that should be considered as you interpreter guidance first for our twenty twenty to adjust to dps guidance are modeling need single digit revenue growth and operating margin expansion for both isn't seen it and the total business second article twenty twenty one adjust your dps of a dollar ninety one benefited from approximately fifteen cents of operating expense shavings related to salaried actions and worked for a well as during the first quarter of fiscal year and will not not repeat during the first quarter of fiscal twenty twenty two third as we outlined earlier we recorded a life or adjustment of approximately nine cents per share during the fourth quarter or dental fragment it was almost entirely due to the covert related pricing dynamics and variability in our infection control products during the year would you not expect a dynamic to repeat in fiscal two thousand time to finally here's our perspective on how your model in the infection control category in fiscal two thousand and twenty two and i previously mentioned we recorded an inventory adjustment of approximately eight cents per share related a certain infection control products while this negatively impacted our gross profit on these products in the fourth quarter of fiscal twenty twenty one for the full year we are and nine cents per share of additional profit compared to fiscal twenty twenty on infection control products after accounting for the fourth quarter inventory adjustment as we look to physical twenty twenty two we have model be gross profit impact from salesman fashion neutral products to be flat on a year over year basis as moderate sales are offset by lower inventory adjustments
spk_1: in that impact of salary savings and the life or jasmine represents approximately six cents per share and we do not expect repeated fiscal twenty twenty two if you remove this one time six cents per share benefit from our fiscal twenty twenty one adjust the dps performance
spk_0: our physical twenty twenty two adjust just a dps expectations of a dollar ninety to two dollars and five cents imply seven percent year over year growth at the midpoint and eleven percent year over year growth at the top of the range it's also a binder three year compounded growth rate of eleven percent of the midpoint and fifty that the top under the guidance range from our fiscal twenty twenty adjusted earnings per share of a dollar fifty five and now i will turn the call back over mark for some additional comments
spk_1: thanks down at the end of it unprecedented year we can say with confidence that patterson has emerged from the pandemic even stronger than we entered it
spk_0: they are optimistic about patterson launcher position and each of our and market and have the utmost confidence in our team or strategy and the essential role we serve our customers and business partners
spk_1: our results reflect our strong business momentum and a meaningful progress we've made over the past several years and moving patterson to a position of strength as fiscal twenty twenty two get underway and business conditions and our and markets continue to recover we are focused on investing in the korea is of our business to accelerate our performance return cash to our shareholders through an attractive given and and leverage are strengthen balance sheet to evaluate opportunities for strategic investment to accelerate our grow up in value creation while the pandemic of certainly not over were all encouraged and hopeful that the positrons will continue to improve and i can assure you the patterson p will continue living our values and maintaining our focus on creating value for our customers business partners and shareholders that concludes are prepared remarks and down and i will now be glad to create your questions operator please open the line
spk_0: thank you as a reminder to ask your question you need to press dar one on your chances are your question to ask about game that star want to ask a question your first question comes from the line of my three from both of you honestly good morning and thanks for her all the details especially on thinking about the to twenty eight january it's like died in a little bit further on that it as you think about what you've learned some our the past year and algae the moving pieces around checking prevention and some other areas has anything changed how you should think it's swing the pathway forward for segue margins and in particular dental second margin a nice place about it just curious he then what you would accomplish pico they had some of the movie pieces dynamics and review demand on cost rationalization during colgate has think about the medium term trajectory for large it's before basis
spk_1: yeah michael this is mark thank you and are you on a couple comment and then turn over clue can get any additional colliding first law we're we're certainly very encouraged by the continued recovering the dell segment and we do to get to market of and very attractive we we are bad or near free pandemic growth raids we certainly expected be there during this calendar year a dentist continue investing in their practices we talked about infection control products well obviously a lot of variability in that during his twenty one wifi to supply chains a lighting and we expect that to be a a positive force going for lord so all positive factor in terms of the and market demand raped and in terms of margin your we continue to focus on the areas that we've been focused on are higher margin products and services and the software technology category are really great britain great value through our tax is bringing him and and increasing the codex how the productivity of that group our our focus on private label products which i think is communicate continue to grow faster than our overall consumable item number of element to to drive that that margin improvement objective that i know downloaded in his comments he and i think i would just standard you know with gonna with the increasing failed we continue to get good expense leveraging as will grow in the top line
spk_0: tom so even were some of the costs that are going to come back into their damn filipino you know some of the t any newcomer things that you know where lower in the dinner and during the pandemic i think we still feel like weren't good position to expand the margins in general business i understand and then like dog that game seen some accounts you made around your growth well to play the market i believe he said across cost dental you're going faster in the tables going chester equipment as you think about the lie behind that can you may be closer to be highly doing into of your thoughts on were share being it's coming from bushy did and and it's like you're seeing essentially a same store girl she then you're just a cluster this
spk_1: oh i think get we bleed the investment that we've been making in the in the business them and in our dental field failed to support organizations over the past several years are you know have been paying off him and continue to pay off yeah we we kept our our old on sales team in place at the onset of the pandemic we were generated good momentum you're a year ago or more this time your we continue to your push hard on supporting our field sales and supporting and ultimately so they could support their customers are down payment build a variety of program conservatives to help our our customers quickly recovered from the pandemic
spk_0: our get customers continue to invest in their practices and i think people see patterson really as the your partner of choice given our broad i equipment life cycle ecosystem and all the various map around services that we provide their so i think it is it's michael a combination of a variety of factors that we've been focused on over there last several years that are helping drive that momentum and that we believe the here against i'm a dental segment
spk_5: thanks so much
spk_0: your next question comes from the line of airing rights from credit suisse your license
spk_6: they and anything for done an animal how can you give us a sense of what tight and now it seems across the in lot of sector on a place and an internal a thing can you mentioned that we should accept the kinda nick at a higher underlying run rate for deploying companion am out what does that mean or what would that look like in terms of the long term growth rate now for the in will how ignorant in in your area
spk_7: yeah thanks
spk_1: i don't think we're going to comment specifically on the exact the long term growth rate but let me give you a little bit of color is relate to our thinking about old the companion and the production segment in all throughout the course of this fiscal year and and we thinking on the calling or post pandemic environment certainly that the market growth change that we've seen in companion animal you'll due to the and treat pet adoption or weeks back what will moderate but still represents an overall increase in growth rates concrete pandemic levels look more at more visits a higher demand for companion animal products and services and a week we are we believe we're going well positioned to continue to take advantage of that increase demand and and we believe our our recent growth rate in this segment are testament that as we shifted production i think as we indicated now we are seeing early signs of the recovery and production animal stagnant from and and market demands and point if the of the economy continues to reopen our schools open restaurants open it cetera and we are seeing increased the man and expect increase demand or a beef and swine products in particular and i think it's we indicated we expected production animals stagnant to get back to pre pandemic growth rate towards the back half of our fiscal year totally that that provides a little bit of additional color of the were very encouraged by the progress that we're seeing in both of those and markets and odyssey also very encouraged by to work are jews are doing to drive value for customers in those areas
spk_6: and i played an injured while on dental and they're testing defeat and continuing can tell each across the gate a and eighty that having a meaningful impact and in twenty to kill our of i think that it in your guidance on black planet the i hear about the larger dsl dynamic but what's the traction you're thinking of a smaller weaker no peter telling can you give it a try to cheat athlete an idiot of that a
spk_0: yes your back there and it would help out of you comment on onto the customers in the space generally a more very pleased with the work or teams across both are dental and with my grandma helped segments are doing in terms of the dsl and corporate account arena both at the regional and national level or the area continues to be a bogus
spk_1: or as we continue to invest their teens again both in the dental and animal health spaced and we continue to pursue the right type of customer that that see the value in the products and services that that patterson provide both at the regional and national level and work august would again working with those groups in those
spk_0: customers that they're really see the comprehend the value proposition we believe are winning business the the are helping contribute to our our growth and we're excited about our progress here again come across both dental and and help and yeah
spk_8: we had a question from jeff johnson from their your line is open
spk_1: thank you good morning i say it down i think you've mentioned that the ten percent dental growth in the quarter relative to two years ago the fiscal que four nineteen a we had consumer balls and maybe you could just cross check this cormier or let me know if my math is right consumable for in the dental fechner probably up about thirteen percent versus two year ago levels your one is that curve
spk_0: act in to within that ten percent thirteen percent those growth rate is there any way to give us some insight and a what the infection control products added versus the not infection control i think you've done that the last few quarters and maybe the for be the last quarter where it matters year over year but any insight i would help ah thanks yeah you're on your mouth is is right on a thirteen percent i think we didn't give found some madam color on a on their consumables girls forever twenty one now and
spk_4: add dad nine percent for the year and and six percent for the for all other considerable
spk_0: yeah year over year yeah certainly to give that for the quarter your i can try to back out that the past three quarters comment i guess they needed in a little lady but if you could give it to us to the held of the pastor
spk_1: yeah i didn't care if you if you if you've got to do the math on on the quarter you get to call them
spk_0: cold and wet a growth in a queue for about eight percent of it's helpful thanks and then mark maybe i'd i'd be interested to hear on the quit equipment side yeah we just started hearing in the last week or two about maybe some supply constraints both i'm shocked and i think even on somebody basic equipment whether that's due to pardon
spk_1: shipping container issues things like that you know i don't think the issues significant at this point but you know kind of what are you seen on both the supply and demand side and and on that supply side does any of that factor into your guidance at this point thanks yeah of things i would say we're seeing a very modest
spk_0: yeah some some country constraints excuse me from or supply chains ban point i would say it's not an acute problem
spk_1: as of yet obviously we're monitoring it closely media really pleased with our equipment performance during his whole twenty one ago but i believe that eight percent a year over year which did exceed our expectations and you know we talked about that patterson equipment and technology eagles eagles use them which we believe as a cooper
spk_0: added advantage for us but we do have a strong
spk_1: funnel of opportunities in the equipment category and we continue our cozy with our manufacturers you stay abreast with any you know potential supply issues that might exist but at this point
spk_9: i would say those are those are certainly a moderate at this point
spk_0: got it thank you your next question is from jason there now it's fiber sandra yolanda so can get more image taken a question mark i want to start with the guide you know another lot of crosscurrents out there with the market with your business and boat dental and and while but a gets as we think through all those elements and one detour i you're taking about the predictability at the top line and title and animal health and then as we're all looking at can mean the redskins inflationary impacts across across structures of companies badge
spk_1: the or maybe how how that's factored into your guide your for the year yeah you think that being in terms of the predictability of kind of the top one it is done indicated we are building in made a single digit topline growth across both a bar or business segment overall for or and y twenty two i think i'd hear some of the and market perspective that we have across god willing to three category dental companion in production a while there are some unique elements within each your only down market we usually the of a him demand at or near free pandemic leveled week actually that to continue to grow back to prepare dammit levels during this calendar year and it's are investing in a practices autumn and involved in terms of the different types of levels of acuity a better got that goes on in the practices with the you know good spending air as well so very encouraged by you know the rick the recovery and effect the full recovery of the downpayment a companion obviously the increase pet adoption has driven you know significant tail and from the demand side there is we indicating we do you expect those he to moderate but ultimately the long term growth rate there in a companion animal stagnant we we believe will i will be higher or then prepare endemic levels and finally them recovery a encouraged in the production animal space by what we're seeing with the reopening of economy and and the recovery and up stability he of the supply chain that that was very disruptive earlier this year and to again we're expecting in the second half of our fiscal year to return to normal pre pandemic growth rate in production as well as still really encouraged by the the three customer segments that we serve and and frankly the the value that we bring to our customers that weeks
spk_0: q a take advantage of a bold from the top line and and obviously driving a bottom line results as well it and and in the risk an inflationary it actually saw that maybe a second guidance yeah so far for we've been rebuilt a little better than into the numbers and we laid out today i think that they should if is very were watching carefully found know more to come as bad as the year progressive
spk_10: eric great and then maybe a little bigger picture questioning that and the margin side on the abide by historical competitive standards of just it would seem like they're still quite a bit of that margin opportunity for for patterson's by adding actually have a year and marky how you encountered in the during the next few years unfolding apps
spk_0: just this year yeah get himself be we we we would agree i can with the general sentiment that year outline i think yeah we we feel like ah margin expansion is is definitely part of our story we feel like there's a lot of opportunity there you know we wouldn't be free and we knew we would get in some games today than we expected to expand during the year year over year but
spk_1: probably wouldn't way out you know anything further than that and terms of our expect expectations over the next couple years
spk_0: gul understood it and
spk_11: thank you we have a question from kevin caliendo with you yes carolina so
spk_1: hi thanks for taking my car
spk_0: the couple modeling questions first is there any any reason to think that cadence for earnings
spk_1: they would not look like they might have pre pandemic at this point or how are you thinking about the progression for the fiscal year
spk_0: anything first half way to take an athlete it any any sort of color cadence would be really helpful
spk_1: yeah
spk_0: sorry go glenn never got it now
spk_10: the i think if you if you look back to
spk_11: the fiscal two thousand and twenty and kind of looked at the first our second half black that would probably be a good way of thinking about
spk_0: fiscal twenty twos and on things during the during the year that that's really helpful
spk_1: also in terms of
spk_0: and terms of your margin expectation the in the growth that margins are we looking at that on a year over year basis meaning out on a maybe not every quarter gonna grab a plate or march lot different than when you talk about margin expansion is there is it sort of okay at the end of fiscal twenty two were in the march an expansion over the end of fiscal twenty one in both segments or how should we think about that trajectory i know you and have been asked this question but any anymore color on that would be really helpful
spk_1: now i think you're thinking about right it's gonna be a year over year story you know there could be some variability in a in the corridors and particularly yeah this was some of the can't but my year over your bases we expect there to be margin expansion in both businesses and what and one last and really quick as i can go can you talk about your strategy around specialty dental whether it's and plants or a liners or anything like that
spk_0: any exploration into those rockets are are expanding your capabilities and as market
spk_1: yeah kevin is mark i mean as we've indicator of the last couple of quarters certainly in our financial and up performance he was treated at know the poo flexibility for us to think about those types of strategic investments that guy can help accelerate our girl and value creation added we'd be talking about some of the categories that and the types of areas that we would focus and whether that yell building scale on our core business
spk_12: expanding in our our present in in more margin a creative categories and certainly enhancing or expanding the the the products and services that we provide are looking at at adjacent these that we're not even today where there may be good girl opportunity specialty would be a good example of that so we're looking at a broad array of of good
spk_0: types of other opportunities from a business development standpoint
spk_13: and we're obviously in a position now all we can make some awesome attachment to again accelerate that that grew up in value creation and and those are kind of thing that we're we're looking at that pursuing thanks so much you're and expressions from you need to rush from goldman sachs carolina so
spk_0: good morning i think so the question and i wanted to ask around the in time that you're staying in the t v and infection control i and do you feel like we're getting closer to appoint a stabilization and frightening
spk_1: the and then physically related to the covered an inventory a gentleman in the quarter dc that more as one time in nature well as the uncertainty in the market and given how pricing and trending in a think the first part down to take a second i think to your question we are seeing pricing much more stable a surly than it was a couple of orders ago i wouldn't say the supply chain is completely stable or back to pre pandemic levels of stability around infection control products but certainly stabilizing and we expect that continue the assuming that the current trend around the pandemic can continue and in the positive direction as well so we do expect pricing to continue to stabilize the supply chain and product availability to continue to stabilize and obviously that our our customers you know really are determining what their go
spk_13: for approach years with regard to infection control in their practices but certainly as we indicated i would you expect that to be a positive part of of that growth opportunity going forward and your we continue to ensure that we have the highest quality of infection control products for customers as well and so this has been i you know calvin period in that area but certainly we're seeing it much more stable and expected to continue yeah me too and i think gosh you know adding on the marks comments from the stability and that pricing and them and the market really has put us in a position where i do believe that that they inventory judgments we recorded the fourth quarter really one time in nature and we're not going to be you know repeating mad if we go forward okay great and then just a quick follow up and down on the kindle demo revenue that we should expect and fiscal twenty two
spk_1: the single digit revenue growth for the full year
spk_0: no an easy compared and in in one que kind of compared to the know pandemic last year and middling did revenue guidance would imply you know what can they be low single digit growth over them back into fourth quarters in the next year obviously they're a lot of moving to on the pp in infection control that is also factored into that mode have any
spk_1: more detail on anna how you're thinking about the elderly donald like men over the course of fiscal twenty two
spk_14: yeah i know the guy was really was mid single digits for that you know the entire company
spk_15: and and you're right there's a very limited there's a bit of a ball was here and in you want in terms of growth rate bathtub yeah we'd expected to be relatively consistent throughout the rest of the year
spk_0: in terms of growth rates
spk_3: for the company and the hall that novel thank you
spk_1: your next person is from then sending hello song guggenheim hi linus open i think take my gosh question a dollar just follow up on some of the guidance she gave some the details are only the to think you can suggesting a new the most of the ball long getting too will fall as about shedding to a loving person glow thought of what you consider to be sure to the base is cool too
spk_0: one number and i'm just trying to reconcile kind of what you reported on a basis for the year to call gets a lot a slumber with seems like it somewhere between about seventy fall on a buffet the my mother was from the sorry expand saving vocals isn't isn't gonna repeat long as he have a long once of infection control that wasn't gonna repeat it or anything else when and reconciling those as adjusted earnings per share battles sort of things fiscal twenty one number that you forgive the good jump off point for fiscal policy yeah not going you haven't rioted so we we finished at a dollar ninety one and adjusted a dps and then and then the neck of the two items you mentioned his or six and an out
spk_1: way and this this year so that really when translate to a jumping off point of view well i'm a dollar eighty five and my comments were that ah the guidance implies seven percent growth at the midpoint and eleven percent growth at the top and from the dollar eighty five and then i think you know and important
spk_3: data point that i at the yeah and was just
spk_0: that games also implies eleven percent play here at the midpoint and fifteen percent cater at the top and from the app twenty pls of a dollar fifty five
spk_16: right okay i get super helpful chinese heritage decided that correctly them on and so on when we're sure the mall in fiscal twenty two and may not not to put words in your mouth and a kind of sounds like we should see on continue organic working in bold segments indian on perhaps decelerating to more normalized levels are
spk_0: in the back half the year old sort of yeah steady sort of margin expansion in both segments year over year or two out the four quarters of fiscal twenty two guy ideology have all those peace and correct
spk_1: now that's a fair characterization own family will get it okay thanks very much appreciated your next question is from job that he would the formula innocent
spk_0: they scares the morning i'm a couple quick ones but a model related but you'll be an outgrowth in the quarter was really strong as a forty percent of is a companion animals up thirty percent said the are more individual targets going to wax actually a more aim to called a positive mix it with in some the line
spk_17: items but the oh enjoy or lack of down actually they're down can get to sort of layout for us why you're seeing some it very slight at still margin from impression on the a already admit teams in total number
spk_1: eating and you're talking the animal health days
spk_0: get that question was ah specific animal yeah yeah ah yeah to computer model to over the course of a year your margins where relatively consistent i think the year over year pieces is a little hard harder
spk_1: the calibrate just given man in the queue for you for dynamics but you don't we believe that and and just feminine pandemic related our impact that happened during fiscal twenty and then trump card fiscal twenty one i think the important point on i animal health space is that we think going forward particular with this kind of girl with that we have a good opportunity to continue leveraging that are prof it into a fiscal twenty two
spk_0: okay got it in any sort of follows up at a couple recent glacial but emit single digit growth about and market seven percent at the midpoint i'm sort of gotta go with the midpoint show i'd much rather tax rate it seems to imply very slight at morgan expansion make it a couple flash will get the formulated get there you know ongoing rose more to come crashing and then some of the affects leverage that we've seen that you guys have gonna a very good job with him you know if that's the case i mean maybe the up would be the five percent of seven percent rather to keep at the midpoint why not a little bit over leverage on it up previously talk about you're going to add a lot of the code you additional revenue without on boring incremental investments post pandemic thanks guys
spk_16: yeah that's true i think then and on you know what we want to start the year in a position where like i said we were doing this as seven percent did find grow and eleven percent of the top and i thank you know you want to probably focus eyes on that and just the the you know
spk_3: bearded men single digit failed rose with good margin expansion and i think the formula on we don't believe there's a lot of gross margin to crash we from there are things that we've outlined on really show up in the gross margin and so as move forward
spk_0: it's a it's really a combination of stable to improving gross margin and and continued apparent for our marriage as we expand their the failed
spk_18: or that i guess
spk_1: and your the outside of london after one more question yeah thank you and your last questions from john them their new line or so i have stuck to return to growth is our fiscal twenty two played out and they can jog yeah a on the side or we lift the first part of your questions filled out for the and often can you repeatedly yeah just on can you expand a little bit about what you see it out and a longer term normalized grow
spk_19: that for a year livestock business i get that it should recover as we moved her cisco twenty two but one the sort of fully beyond that cares what you think that business can do longer term
spk_13: yeah i think we me believe back to pre pandemic levels that alone single digit growth business
spk_20: going forward it that's where we with you at this point you know certainly to be no good strong demand global protein but again i would say low single digits
spk_1: great thanks and then one last one i view he talked i think about ah i'm gonna than fast and their practice and eighteen the things that you expect will drag twenty two kids to elaborate on that were they in lasting white what sort of equipment and and are you saying to be particularly get
spk_0: yeah i think be
spk_3: he was that we would surely pleasantly surprised i think a year ago at this time you know we we did not expect our equipment
spk_1: and he admits to do as well as it good frankly and we do not expect damage to make investments you know during the endemic that they didn't i think that his speech to really the strength of be the and market and our customers really believe in they continued opportunity for them to drive a great patient care and for them to drive sick that in their practices so
spk_0: we're seeing the investments really across across the border in the work courtney categories the digital art software ie services and again i think really you speak to that the strength that we've been from the dental market in in in the industrial we're all in in the investing for a long term success and and we feel like we're
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