On August 28, 2024, Patterson Companies Inc (PDCO, Financial) released its 8-K filing reporting its fiscal 2025 first-quarter earnings for the period ending July 27, 2024. Patterson Companies Inc is a dental distributor and wholesaler of consumable products and equipment operating through two business segments, Patterson Dental, and Patterson Animal Health. The company generates maximum revenue from the Animal Health segment and derives almost all of its revenue from the United States.
Performance Overview
Patterson Companies Inc reported consolidated net sales of $1.54 billion, a decrease of 2.2% compared to the same period last year. Internal sales, adjusted for currency translation and the net impact of an interest rate swap, decreased by 2.8% year-over-year. The reported net income attributable to Patterson Companies Inc was $13.7 million, or $0.15 per diluted share, compared to $31.2 million, or $0.32 per diluted share, in the first quarter of fiscal 2024. Adjusted net income, excluding deal amortization, totaled $21.0 million, or $0.24 per diluted share, compared to $38.6 million, or $0.40 per diluted share, in the prior year period.
Challenges and Impact
The company's performance was significantly impacted by the Change Healthcare cybersecurity attack, which affected the value-added services category in the dental segment. Additionally, lower sales in the companion animal business and the timing of certain corporate expenses contributed to the underperformance. Don Zurbay, President and CEO of Patterson Companies, stated,
Our first quarter results fell short of our expectations, primarily due to the greater than anticipated impact of the Change Healthcare cybersecurity attack on the value-added services category in our dental segment, along with lower sales in our companion animal business and the timing of certain corporate expenses."
Segment Performance
In the Dental segment, reported net sales were $550.4 million, with internal sales decreasing by 2.8% year-over-year. Internal sales of consumables decreased by 2.1%, and equipment sales decreased by 2.4%. The value-added services category saw a 6.7% decline, primarily due to the cybersecurity attack.
In the Animal Health segment, reported net sales were $982.4 million, with internal sales declining by 2.8% compared to the first quarter of fiscal 2024. Consumables sales decreased by 3.0%, equipment sales decreased by 3.8%, while value-added services increased by 8.3%.
Financial Metrics and Capital Allocation
During the first quarter, Patterson Companies used $285.0 million of cash from operating activities and collected deferred purchase price receivables of $271.8 million. Free cash flow improved by $1.8 million compared to the first quarter of fiscal 2024. The company declared a quarterly cash dividend of $0.26 per share, returning $23.3 million in cash dividends to shareholders. Additionally, Patterson repurchased approximately $50.0 million of shares, with $450 million of share repurchase authority remaining.
Analysis and Outlook
Patterson Companies Inc's first-quarter results highlight the challenges posed by external factors such as cybersecurity attacks and macroeconomic conditions. The company's strategic focus on cost management and supporting customers with a differentiated value proposition will be crucial in navigating these challenges. Despite the setbacks, Patterson reaffirmed its fiscal 2025 earnings guidance, reflecting confidence in its business strength and competitive positioning.
For more detailed financial information and analysis, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Patterson Companies Inc for further details.
