Patterson panies(PDCO) - 2024 Q3 - Quarterly Results

Patterson Companies Fiscal 2024 Third Quarter Operating Results Financial Highlights The company reported a 1.0% net sales increase to $1.62 billion, returned $148.8 million to shareholders, and revised its fiscal 2024 earnings guidance downwards Q3 FY2024 Financial Metrics | Metric | Q3 FY2024 Value | | :--- | :--- | | Reported Net Sales | $1.62 billion (+1.0% YoY) | | Internal Sales Growth | +0.3% YoY | | GAAP EPS (diluted) | $0.52 | | Adjusted EPS (diluted) | $0.59 | | Capital Returned to Shareholders | $148.8 million | - The company revised its fiscal 2024 GAAP earnings guidance to a range of $1.99 to $2.04 per diluted share and its adjusted earnings guidance to $2.30 to $2.35 per diluted share[8] - Internal sales growth was primarily driven by a 6.3% increase in dental consumables, which grew 7.2% year-over-year excluding certain infection control products[8] Consolidated Financial Performance Consolidated net sales grew for Q3 and the first nine months, but net income declined in both periods due to lower equipment sales and higher expenses Third Quarter Fiscal 2024 Results Q3 Performance Comparison | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Consolidated Net Sales | $1.62 billion | $1.60 billion | | Reported Net Income | $47.7 million | $53.9 million | | Reported Diluted EPS | $0.52 | $0.55 | | Adjusted Net Income | $55.0 million | $61.1 million | | Adjusted Diluted EPS | $0.59 | $0.62 | - The year-over-year decrease in both reported and adjusted net income was primarily attributed to lower sales of dental equipment and increased operating expenses[6] - Internal sales, which adjust for currency, acquisitions, and interest rate swaps, increased by 0.3% compared to the prior year[5] Year-to-Date Results Nine-Month Performance Comparison | Metric | First 9 Months FY2024 | First 9 Months FY2023 | | :--- | :--- | :--- | | Consolidated Net Sales | $4.85 billion | $4.75 billion | | Reported Net Income | $118.9 million | $132.6 million | | Reported Diluted EPS | $1.26 | $1.35 | | Adjusted Net Income | $140.9 million | $154.0 million | | Adjusted Diluted EPS | $1.49 | $1.57 | - For the first nine months of fiscal 2024, internal sales increased by 1.2% year-over-year[12] Segment Performance The Dental segment's internal sales grew 2.5% driven by consumables, while the Animal Health segment's internal sales declined 1.5% due to weakness in the companion animal business Patterson Dental - The Dental segment's reported net sales were $637.1 million in Q3 FY2024, with internal sales increasing by 2.5% compared to the prior year[7] Dental Internal Sales Growth (Q3 YoY) | Category | % Change | | :--- | :--- | | Consumables | +6.3% | | Equipment | -2.4% | | Value-Added Services | -0.2% | - Excluding the deflationary impact of certain infection control products, internal sales of consumables grew even stronger at 7.2% year-over-year[7] Patterson Animal Health - The Animal Health segment's reported net sales were $967.3 million in Q3 FY2024, with internal sales decreasing by 1.5% year-over-year[9] Animal Health Internal Sales Growth (Q3 YoY) | Category | % Change | | :--- | :--- | | Consumables | -2.0% | | Equipment | -5.9% | | Value-Added Services | +44.2% | - The overall sales decline was due to reduced sales in the companion animal business, which more than offset the positive growth in the production animal business[9] Balance Sheet and Capital Allocation The company generated $50.5 million in cash from operations and receivables, returning $289.6 million to shareholders year-to-date, with $195 million remaining for share repurchases - Free cash flow for the first nine months of fiscal 2024 improved by $11.9 million compared to the same period last year, driven by a decrease in working capital[10] Capital Allocation (Q3 FY2024) | Item | Amount | | :--- | :--- | | Quarterly Cash Dividend per Share | $0.26 | | Cash Dividends Returned | $24.7 million | | Share Repurchases | $124.1 million | | Total Returned to Shareholders | $148.8 million | - At the end of the third quarter, Patterson had approximately $195 million of share repurchase authority remaining[11] Fiscal 2024 Guidance The company revised its fiscal 2024 earnings guidance downwards, citing challenges from inflation, higher interest rates, and a potential economic slowdown Fiscal 2024 EPS Guidance | Metric | Range | | :--- | :--- | | GAAP Earnings per Diluted Share | $1.99 - $2.04 | | Non-GAAP Adjusted Earnings per Diluted Share | $2.30 - $2.35 | - The guidance reflects ongoing challenges including inflationary trends, higher interest rates, and a potential slowdown in the broader economy[14] - The non-GAAP guidance excludes approximately $29.3 million, or $0.31 per diluted share, of after-tax deal amortization expenses[15] Appendix: Financial Statements This section provides detailed unaudited financial statements, including statements of operations, balance sheets, cash flows, and segment-level performance data Condensed Consolidated Statements of Operations Q3 FY2024 Operations Summary | Metric (Q3 FY2024) | Amount (in thousands) | | :--- | :--- | | Net Sales | $1,616,095 | | Gross Profit | $351,006 | | Operating Income | $70,012 | | Net Income Attributable to Patterson | $47,703 | Condensed Consolidated Balance Sheets Balance Sheet Summary | Metric (as of Jan 27, 2024) | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $1,832,563 | | Total Assets | $2,939,949 | | Total Current Liabilities | $1,283,713 | | Total Liabilities | $1,967,784 | | Total Stockholders' Equity | $972,165 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary | Cash Flow (Nine Months Ended Jan 27, 2024) | Amount (in thousands) | | :--- | :--- | | Net cash used in operating activities | $(719,849) | | Net cash provided by investing activities | $718,015 | | Net cash provided by (used in) financing activities | $(34,091) | | Net change in cash and cash equivalents | $(35,671) | Sales Summary Consolidated Sales by Category (Q3 FY2024) | Category | Amount (in thousands) | Internal Growth % | | :--- | :--- | :--- | | Consumable | $1,262,290 | 0.2% | | Equipment | $245,262 | -2.9% | | Value-added services and other | $108,543 | 9.4% | | Total | $1,616,095 | 0.3% | Operating Income by Segment Q3 Operating Income | Segment | FY2024 (in thousands) | FY2023 (in thousands) | | :--- | :--- | :--- | | Dental | $53,630 | $60,302 | | Animal Health | $32,104 | $30,197 | | Corporate | $(15,722) | $(14,577) | | Total | $70,012 | $75,922 | Reconciliation of GAAP to Non-GAAP Measures Q3 FY2024 Net Income and EPS Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Income Attributable to Patterson | $47,703 | $7,326 | $55,029 | | Diluted EPS | $0.52 | $0.08 | $0.59 | Free Cash Flow Free Cash Flow Reconciliation (Nine Months Ended) | Metric | FY2024 (in thousands) | FY2023 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(719,849) | $(728,197) | | Additions to property and equipment | $(51,196) | $(42,442) | | Collection of deferred purchase price receivables | $770,319 | $758,001 | | Free cash flow | $(726) | $(12,638) | Non-GAAP Financial Measures The company utilizes non-GAAP measures like internal sales and free cash flow to offer investors supplementary performance insights, excluding certain variable items - Internal Sales: Represents net sales adjusted for the effects of currency translation, contributions from recent acquisitions, and the net impact of an interest rate swap[17] - Free Cash Flow: Defined as net cash used in operating activities less capital expenditures, plus the collection of deferred purchase price receivables[18] - Management believes these non-GAAP measures provide a helpful representation of the company's performance and enable better comparison of financial results between periods[22] About Patterson Companies and Forward-Looking Statements Patterson Companies is a key distributor in the dental and animal health markets, and this report contains forward-looking statements subject to various business risks - Patterson Companies connects dental and animal health customers in North America and the U.K. to products, technologies, and business solutions[25] - The report contains forward-looking statements that are not guarantees of future performance and are subject to inherent risks, uncertainties, and changes in circumstances[26] - Key risk factors mentioned include supplier dependence, competitive markets, macroeconomic conditions like inflation, and risks inherent to the health care industry[27][28]