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2026.09.24 | TB | MedTech | Patterson Dental Cross-Selling

原标题：Patterson Dental – Fighting Tooth & Nail – Hardware-software Cross-selling Outlook & Evolving Competitive Dynamics

#medtech

Third Bridge · 2026-09-24

Analyst-led • 10 Sep 2026

Companies: HSIC US, XRAY US, AMZN US

Chad Bushman (CB) Head, Business Development, Dental at Stonehaven Cozmix Group AG (SC Group)

Bryce Victor (BV) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

BV [00:00:01]: Welcome to Third Bridge's Interview entitled Patterson Dental – Fighting Tooth & Nail – Hardware-software Cross-selling Outlook & Evolving Competitive Dynamics. I am Bryce Victor, and I will be facilitating today's Interview with Mr Chad Bushman, former VP of Sales and General Manager at Patterson Dental.

Chad, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

CB [00:00:33]: I agree.

BV [00:00:34]: Thank you. If you would, could you begin with a brief introduction to your background?

CB [00:00:39]: My name is Chad Bushman. I was with Patterson Dental for over 18 years. My most recent role was as Vice President of Sales and General Manager for the North American Dental business. My remit included responsibility for all sales and operations at the field level for both our US and Canadian business, encompassing approximately 2,200 folks within the org that I was responsible for, overseeing all consumable equipment, software, strategic accounts and business services divisions.

Questions

[00:01:14] How does Patterson Dental defend its market share against players such as Henry Schein or Benco Dental?

CB [00:01:26]: I would say this goes for most distributors, but Patterson, in particular, largely relies on the relationships that they have with the offices via their field sales force as well as some of the unique offerings that they bring to the market from a distribution standpoint. 95%-plus of the stuff that distributors sell, their competitors sell. Where you can find unique, exclusive relationships that fit your brand and that enhance your portfolio, I think that's one way that they do it. Largely, it's through the relationships that are developed at the field level with their field sales reps, their territory representatives and their local management teams.

[00:02:14] In our pre-Interview discussion, you mentioned that online marketplaces and sellers, procurement platforms and grey market dealers are substantial threats to Patterson Dental's standing. Could you break down which of the company's key offerings are at risk from each of these types of entities and the top-line erosion it is experiencing as a result?

CB [00:02:33]: When you look at the procurement platforms and online marketplaces and grey market dealers, I think there's a fair amount of overlap there. I wouldn't necessarily classify folks like Darby and Safco as grey market dealers or even necessarily online marketplaces. Those are just alternative channels to get the product. I think the aspect of the business that is most at threat is the consumables business because it's the one that requires the least… It's been commoditised to some degree. It's the one that requires the least amount of expertise to sell and/or support, and it's the one that the doctors are most comfortable making their own decisions about and troubleshooting on their own. When you think about the equipment and the service business, I think those are much more difficult businesses for those competitors to make inroads in just because of the significant amount of aftersales support, training, in-servicing, engagement, installation, all the rest of it. It would be the consumables business.

[00:03:49] On 13 February 2026, an S&P Global article estimated that 80-85% of Patterson Dental's revenue comes from consumable distribution. How might these companies be chipping away at Patterson Dental's revenue? Could you quantify what you think the company stands to lose?

CB [00:04:08]: Yes. Without getting into numbers, I would tell you that the number that you just quoted is high. I don't believe that it's 80%-plus from that part of the business. It's lower than that. Having said that, the way that they're chipping away, there's two ways, and they're interrelated. One is via price. When you think about these other channels, they're able to provide consumables at a much lower margin and remain profitable because they're not full-service dealers. When you think about a full-service dealer like a Patterson or some of their competitors, the amount of overhead that they have to absorb or pay for via the margin that they get on their products to have hundreds of service technicians and vans and parts and to have field sales forces that many customers still find highly valuable, that limits Patterson and other dealers' ability to really compete on price at the level that online marketplaces, grey market dealers, procurement platforms, I don't know, but I call them competitors as much as they are enablers. I think that's the biggest challenge for them is it's a margin play, and they're struggling to articulate why a customer should pay whatever percentage more for the same product from Patterson that they can get from somewhere else when you're talking about a commoditised product, which is largely what those consumable products are.

BV [00:05:58]: Do you see that threat as more pertinent to non-corporate accounts, which Patterson Dental has had strong relationships with historically? Or does it pose a heavier risk in the DSO [dental service organisation] setting?

CB [00:06:10]: At least in the short term, I think they pose a heavier risk at the private practice level rather than the DSO level, and the reason for that is the DSOs… The individual doctor is more easily able to segment their purchases or bifurcate their purchases. They can buy their consumables from one place and they can get their service and their equipment from a full-service dealer, if you will. Where the DSOs, in order to get the price that they want on the consumables, they're going to need to commit to the service and the equipment work. Since that's not really in the wheelhouse yet for most of these online sellers, that makes it, I think, less threatening in that space. Now, when the DSOs start to try to parcel out their purchases, and I think that's already underway or different DSOs are trying to figure out how to do that, they'll do it, but I think they'll pay more for service and equipment, the DSOs will. Depending on the size of the DSO, I don't know how much lower the market can go, quite frankly. I think the larger DSOs have already hit the lower limits. The threat is more at the individual practice level. The scary part for full-service dealers is that's still the bulk of the market. For all the talk and not unwarranted hype of DSOs, they still represent 30% of the market, 35% depending on who you believe.

BV [00:07:50]: How are Patterson Dental's relationships – which have given the company a competitive advantage – lacking, to the point where those private practices are convinced they should go to different channels to get their consumables?

CB [00:08:05]: I think those relationships only go so far. At the end of the day, the individual practice owners, they're small business owners. Every dollar they spend that they don't have to is a dollar out of their pocket. It's different than a corporation. Individual doctors aren't thinking about working capital and all of that. They're thinking about what goes in my bank account. The relationships matter, but they only matter to a point. The number of conversations that I've been a part of where doctors say, "I like you, I like what you do for me, I appreciate you, but…" The but is always, "I can't justify spending X percent more on the same product, it's just not the right thing for my business," knowing that they're going to continue to be able to leverage the full-service dealers against each other to continue to get competitive pricing on the products they can't get from online dealers or the equipment or the service.

[00:09:01] You mentioned that Patterson Dental's 80-85% revenue in consumables was slightly overestimated. Could you elaborate on why you think that? What is the misunderstanding that's driving that miscalculation?

CB [00:09:22]: Actually, to be honest with you, I'm a little confused with that number, again, just knowing the market share of at least the public dealers, and Patterson formerly being public. There is some data within the industry, but just knowing Patterson's P&L, which again, I'm not going to get into, not that you're asking me to, I'm trying to figure out how they could be so far off. When you think about the total amount of revenue that comes in, and there's so many different pieces, it could be a miscategorisation of products that are in the equipment realm and putting them in the consumable realm. When you think about small equipment, sterilisers, compressors, vacuums, handpieces, things of that nature, some of that could just be a categorisation issue, being miscategorised. Different lab products could be miscategorised. I'm not sure where that's coming from, quite honestly. I want to be specific. We're talking about revenue, right? We're not talking about profit.

BV [00:10:29]: Yes. Essentially, 80-85% of its revenue is approximately from the distribution of relatively low-cost consumables.

CB [00:10:38]: Yes, that's high.

[00:10:42] How material is the impact of a lower-cost digital competitor such as Amazon Business infringing on consumable volumes and recurring revenue to Patterson Dental?

CB [00:10:54]: Since you called it out, I would say relatively very low threat from Amazon Business at the moment. Amazon has sort of been the bogeyman in the dental industry for a very long time. I can remember 15 years ago, folks worrying that Amazon was going to come in and take all of our business. Some of that was sparked by the impact that they had on other industries and other distributors like Grainger, although Grainger came out better for it. They've just not been able to secure the relationships with the manufacturers that they need to in order to make a large enough dent or really even a material dent as far as we can tell. Amazon has built some relationships with some historical CPG manufacturers that largely go to direct-to-consumer anyway, but none of the largest dental manufacturers, to my knowledge, have opened up Amazon to the consumables. I think in large part, there's a massive first-mover disadvantage. Whoever does it first is going to get buried by existing distribution. This is my rough way of putting it. There aren't any dentists out there that have figured out how to do dentistry without buying consumables.

I don't know what access Amazon, at least in North America, gives the manufacturers that they don't already have. Now, could there be a different cost structure to that relationship? Potentially, but I don't know that it increases the manufacturer's access beyond what they currently have. That coupled with the first-mover disadvantage are reasons why I think we haven't seen a huge impact from folks like Amazon.

[00:12:47] As the industry continues to shift with the persistent consolidation of independent dental practices into DSOs, how is Patterson Dental reframing its prioritisation of non-corporate and DSO contracts? How can the company best penetrate these customer bases that it has historically not prioritised?

CB [00:13:10]: It's like anything, if you want to be a successful distributor in this space, you got to be able to do both. While I agree that the shift to DSOs has been persistent and continues to grow, it's growing at a slower rate than it has historically. There's a lot of reasons for that, cost of money, low-hanging fruit is gone, and we've seen a lot of these DSOs get overleveraged. They've made bad purchasing decisions. A lot of the DSOs have not done a very good job of actually finding the efficiencies and the synergies that they thought that they would be able to find. I think it slowed it somewhat, although it's still the fastest-growing part of the space.

I think what you're seeing on the distribution side is continued and increased investment in that space, whether that's investment in human capital, whether that's investment in systems to better integrate with the various DSOs, procurement platforms being one area that that works, ServiceNow, those sorts of systems that can help you manage large corporate accounts like that and then a restructuring of the go-to-market where historically, it may have been handled at the field level by a salesperson, now building out more of a national account structure, if you will, and really try to figure out what's the right model to service these folks from a human engagement standpoint, from a processes and systems engagement standpoint. That's where I see the biggest change at Patterson. When you look at the investment dollars going into building and maintaining what I would call a traditional sales force vs a corporate accounts team, that's where I see the biggest difference.

[00:15:04] You mentioned that private practices are leveraging the channels against one another, but DSOs have less flexibility there. Could you break down the purchasing power and leverage that DSOs possess in contract negotiations with Patterson Dental?

CB [00:15:19]: I want to be clear in what I was saying. I think individual practices have a greater ability at the moment to bifurcate or segment out their purchasing because they're not getting the pricing that DSOs are. The power the DSOs have to negotiate pricing is very, very high. Having said that, it's contingent, generally speaking, on them being all in with a distributor, a particular distributor. We are seeing certain large DSOs that are effectively handing out hunting licences and signing agreements that are non-exclusive agreements. What we see in that space is their leverage drops somewhat, but not as much as the distributors would like, because there's always somebody willing to go lower just to get a piece of business that they don't already have. I won't say they don't have any ability to negotiate the separate channels, they do, but really, where they get the biggest bang for their buck, the DSOs, I mean, is when they are willing to commit all in to a dealer. If I'm Patterson, I may not be able to give you as low of a price on your consumables, which is the bulk of your purchases, if you're not willing to commit your service business and your equipment business to me, which are higher-margin pieces of my business that I can use to offset what it is I'm giving up on the consumable side.

BV [00:16:54]: Regarding those all-in contracts, do you think that the order volume offsets the lower margins for Patterson Dental overall?

CB [00:17:07]: I don't think that the order volume has offset the lower margins for Patterson or any dealer over the last 10 years. I'll use one of the words you… I think it's been a persistent race to the bottom, and that's been the hard part for Patterson and others is that it's tough to outsell the margin erosion. Until there becomes a point at which a new normal is found or a new stasis is found that is going to work for all parties involved, it's going to continue to be a push and pull.

BV [00:17:46]: Over the next 1-3 years, where do you see the margin profile deteriorating to? Do you think it will be low-single digits?

CB [00:17:57]: I think it depends on what segment of… Are we talking about DSOs specifically?

BV [00:18:02]: Yes.

CB [00:18:03]: I think it depends on what segment of the DSOs you're talking about because DSOs, we tend to use that term as though they're a monolith, but they're not. You've got your national or elite DSOs, your top 25. You can even argue that there's a top 10 and then there's 11 to 25. Then it starts to fragment pretty rapidly from there. There's just so many different segments in there. You can have a middle market, you can have a large-middle market, you can have a small-middle market. If you're looking at the large DSOs, yes, low-single digits. If you're looking at the middle market, low-double digits to mid-double digits is where I see it going in the next 2-3 years. The DSOs are going to continue to ask until the distributors, including Patterson, start to walk away from business. When enough of them start to walk away, just because it doesn't make sense anymore, then I think that's when we'll find that, but I still think there's a feeling-out period that's going on, but I do think it will get figured out over here in the next couple of years.

When you look at… Heartland just re-upped with Schein. That was open for RFP. MB2 has gone with a dual-contract hunting licence deal. Pacific is with Patterson. I think folks have chosen their corners for the next couple of years, but I think it will be interesting when the next RFP cycle comes up to see what happens.

[00:19:38] Aside from consumables in terms of revenue throughput, how well is Patterson Dental monetising the full equipment life cycle for dental practices beyond the initial capital equipment sale and basic consumable distribution?

CB [00:19:53]: I think they're doing it well. Specific to equipment, I think Patterson does as good of a job as, if not better, than anybody out there at monetising that from the perspective of both the initial sale, but also service being a key component of that equipment life cycle and what you get from that, from a profitability standpoint. That's one area that Patterson and other dealers can help make up some of that margin degradation, if you will, across the consumable piece. In terms of monetising the basic equipment or the basic consumable, I also think they do a pretty good job. They've got a good team that is consistently trying to identify areas where there are mutually beneficial alternatives for customers. They spend a lot of time doing that because, frankly, it's a demand of the DSOs, and it's something that Patterson is constantly on the lookout for as are the other dealers in terms of how can we find products that we can offer to our customer at a lower price so that we could show savings, but that also we can make some more profit off of as well. All in all, I think they're doing a pretty good job of that across both categories.

[00:21:13] What specific investments could Patterson Dental make to scale technical support and value-added services to drive stickier long-term relationships, either with non-corporate private practices or DSOs?

CB [00:21:26]: I think the answer is similar for both. To me, service is arguably Patterson's largest differentiator, technical service, I mean. They have the most service technicians. They have the most well-trained service technicians. I think customers see a lot of value in that. There's a lot of indicators from within the business that I would look at that would verify that. I think continuing to invest in that team and scaling that team out makes a lot of sense. That's a challenging area to spend money because that's a highly competitive market. The trades. Everybody is paying more for high-quality tradespeople these days. While I think it's a critical place for investment, it's not going to be inexpensive to continue to scale that. I think the other thing that Patterson could do is continue to and really ramp up investment in integration with systems that reduce the reliance on human capital and automate a lot of the functions out there that today are being done manually. I think those are two of the big things that they could do.

When you think about a distributor, whether it's Patterson or somebody else's ability to service large DSO accounts or even thousands of private practice accounts efficiently and effectively, the more manual it is the more your cost to serve goes up. While your margin might look nice, what that looks like when it gets to the bottom is very different. I think continuing to identify and invest in different automation and systems is one of the biggest areas. Frankly, for me, from a value-added services perspective, and this is something certainly the DSOs are looking for, but I think a really key play here is how do you provide the value-added services to private practice that the DSOs are, so that individual private practitioners don't feel like they need a DSO in order to compete. How do you build out a portfolio of value-added services that offer all the same back-office and non-clinical services that a DSO might provide to an individual practitioner that today, they're relying on themselves to do or they're hiring folks to do, how do you do that to allow them to compete more efficiently and more profitably.

[00:24:13] In January 2026, Patterson Dental renewed its equipment distribution partnership with Dentsply Sirona. How does the confirmation of the partnership continuation position Patterson Dental to win large DSO contracts?

CB [00:24:30]: It's an interesting question because I think it only helps or hurts Patterson to the extent that the DSO market values or understands the value proposition that Dentsply Sirona may or may not bring in the equipment space. Dentsply Sirona has not done a great job of engaging in that space. Let me rephrase that. They haven't done as good of a job as some of their competitors at engaging in that space historically. I don't think it automatically positions Patterson in a stronger position. If Dentsply Sirona isn't viewed as one of the key manufacturers of choice for the DSO market, I don't know that it helps or hurts Patterson particularly. To the extent that Dentsply Sirona can figure out a way to articulate a meaningful value proposition that the DSO market says, "Yes, that makes sense to us," then I think it's huge for Patterson to continue that relationship, but I haven't seen that over the last handful of years. I haven't seen that the DSO market has prioritised Dentsply Sirona's product offering in a meaningful way.

BV [00:25:47]: Are there steps that Patterson Dental could take to help strengthen Dentsply's positioning and therefore, make the partnership a bit stronger? Or do you think Patterson Dental's ability to prove its value add is almost entirely reliant on Dentsply's marketing?

CB [00:26:01]: Yes. I think Patterson, as one of, if not Dentsply Sirona's largest partners, they can continue to challenge them and push them and provide them market data and feedback from existing customers. Patterson has the largest installed base of Dentsply Sirona products in the world, I'm almost certain, and nobody has more market intelligence about how the product is being received, how it's being used than Patterson. I think continuing to share that and to push Dentsply Sirona to continue to innovate and to bring solutions to the market that the customers are asking for, I think that's one area that they could help. I don't think it's entirely up to DS. The reputation and the visibility that Dentsply Sirona has at the street level is impacted by distribution sales reps and what they're talking about and how they position it to their customers.

Continuing to ensure that the Patterson reps have solid relationships with their counterparts at Dentsply Sirona in the field and that they're working together, that they've got strategic plans to go out and target and grow that business, those are ways that Patterson could help, but the product also needs to be compelling, and the value proposition needs to be compelling from the manufacturer side.

[00:27:29] A previous Third Bridge expert [see Patterson Dental – Fusing Equipment & Software Commercial Growth – 27 May 2026] believed that Patterson Dental's regional president layer is a redundant overhead, particularly with DSO consolidation, further reducing the need for local branch contacts. At a structural level, where do you see the best opportunity for overhaul in the company's sales model? How can it win DSO contracts without jeopardising the customer service and relationships that give it a strong standing in non-corporate accounts?

CB [00:27:59]: I'll say one brief thing. I don't know the expert that you spoke to before, but given what they said about the region president level being redundant, I can tell you that they've never been in that role or they've never been higher than that role. That role is absolutely not redundant. It is incredibly critical for both the middle-market DSO piece, and the private practice. I will agree that when you think about the large DSO, and I'm talking 100 offices plus, the region presidents don't really need to be involved in that, but let's not lose sight of the fact that 60-70% of the market is still private practice. As much as we want to talk about, it's all going to the DSO space. Currently, the largest chunk of business still resides at the private practice level, and the folks that occupy that layer are critical in the day-to-day execution and customer service of that layer. That's me on my soapbox for that layer.

When you think about how Patterson can be more effective in structuring their sales force and their go-to-market, they've got two opportunities. One, they've got to continue to build out the strategic accounts or DSO team that they have. They continue to need more people to go out and do business development and acquire new accounts, but they also need to invest in systems and/or people to support that business because it's not a small task to onboard a 250-practice DSO. When you think about the logistics that are involved in that, the coordination that's involved in that, it's a lot of heavy lifting and to make that a seamless process requires a lot of coordination and a lot of people. I think they need to continue to invest in that space. When I think about the private practice side, which I still think is currently the largest opportunity, strictly from a market share perspective, there needs to be a fundamental rethinking of the go-to-market and what that looks like.

When you look at it today, it's largely dependent, whether it's Patterson or any other dealer, largely dependent on a single sales representative who represents, call it, 80% or more of the relationship with the distributor, with technical service being the other part. That's a huge risk, I think, for any dealer, and Patterson is no exception. The market has seen it over the years when there's an exodus of reps from one dealer to another, we see fundamental and material shifts in market share and in revenue. I think that continues to be a risk, and a fundamental rethinking of how they're structured going to market and what that looks like and who the touch points are for the doctor. Then frankly, when you think about the demographic shift at the dentist's level, the newer generation of dentists don't necessarily value that individual sales relationship the way that a more tenured demographic might. I think that's going to require a different way of engaging with that customer, whether that's more e-comm, web-based, whether that's more of a team selling approach. There's a lot of different ways to think about that, but that's where I think they have an opportunity.

BV [00:31:33]: Do you think Patterson Dental has the expendable capital to invest in and expand the DSO sales portion without jeopardising some of its current customer service sales teams that have been strong in non-corporate accounts?

CB [00:31:50]: I do. I think the dollars are there. There's opportunities. When you look at it from the outside and you know enough about the dental market, it's not terribly difficult to see. I'm not saying that in a negative way. I'm just saying it's more of just how do you get there. Meaning I think there's a lot of opportunities for some efficiencies, some productivity gains, consolidation of some different functions that currently are dispersed across the organisation. How do you consolidate that, provide a more consistent customer experience and potentially find some dollars that you can then reallocate to invest in different pieces of the business?

[00:32:40] How substantial is the lock-in effect of software for a practice that adopts Eaglesoft or Fuse? Does this meaningfully push dentists to buy supplies and equipment from Patterson Dental, or are they easily able to source supplies from other vendors despite using the company's software?

CB [00:33:01]: To use your phrase, the lock-in effect, it used to be very strong. There used to be a saying in the industry, own the desktop, own the practice, and you can tell how old that is because we're talking about desktop. That, I think, is no longer the case. When you think about the number of practices out there that use a software platform from one provider and purchase products from another provider, it's the majority. It's over 50%, and it might be well over 50%. Having said that, I think the (audio cuts out 33.40-33.42), and some of that is a function of when you think about all the different practice management softwares out there that aren't sold or owned by traditional dealers, that I think has helped accelerate that. Having said that, I will say that it is much easier to sell consumables and equipment to a customer that has your software than it is to someone who doesn't have any relationship with your software or otherwise. Because you have a reason to have a conversation. You've got something that's already (audio distorts 34.12) about that can then lead to other conversations more organically. Both of those things are true.

BV [00:34:25]: How do you see that trending in the near future? Do you see a circle back effect where it is strengthening again, or could there be a divergence in that trend with AI point solutions?

CB [00:34:41]: I think the trend continues. I don't see a massive circle back. Even if you came out with the best practice management software, I don't know that that's going to… Could there be some effect? Yes. Because, again, if you're able to sell a unique piece of software, it then opens the door for you to have conversations about other things, but I don't think there's going to be this circle back to a day where a customer feels like, "Because I have this software, I feel like I need to buy everything from them." Unless distributors and/or the software providers were somehow able to tie the two together in a way that was legal and made sense and was a compelling enough offer. If that were to happen, potentially, but otherwise, I don't know that we're going to see, "Hey, I bought a software from this place, now I'm going to buy everything from them automatically."

[00:35:38] The aforementioned expert said that Patterson Dental's cloud-based Fuse PMS [practice management software] was promised way before it ever came out with little marketing or strategy, representing a significant missed opportunity against Curve Dental and Dentrix. What are your general thoughts on this claim? How can Patterson Dental potentially make up for that underwhelming launch and lag behind Curve Dental and Dentrix?

CB [00:36:07]: They're not wrong. Looking back, there were a lot of things that were done well, and there were a lot of things that could have been done differently. Fuse, I think, suffered from what I would call an identity crisis. I'm not sure that they had ever landed on who exactly it was for and why exactly who they thought it was for should buy it. While I think it was a good product, there are products that are very good for certain segments, and there are products that are very good for the masses, and I feel like Fuse was caught in between. Again, it didn't quite know who it was for. That's a challenge. There continues to be an opportunity in that space because I would argue that although we know the names of some of the large players, I don't know that anybody has what I would call a dominant market position. I continue to think that there's opportunity there.

The opportunity is, how do you create an ecosystem that is flexible enough to integrate the far too many software offerings that are out there. I think that the days of one software platform being the be-all, end-all in a dental practice are over. What you're going to want to see now, if I'm a DSO or even if I'm a private practice, is, "What platform can I adopt that will allow me to pick and choose the different offerings that are out there and integrate seamlessly?" I would think about it almost like the iPhone, like the iOS, and I'm going to use some crude terminology here, but the iOS is basically an on-prem device. It's a piece of hardware that you have in your hand. It's all the apps that are on it that make it valuable to you, but without that platform, you can't use all those apps. The future or where I would be looking if I were Patterson is, are you building out a platform or can you build out a platform that can seamlessly integrate with the hundreds of software applications that are out there that solve different problems for dentists, whether they're DSOs or individual practitioners, and allow them to integrate seamlessly so that I can pick and choose à la carte the ones that are right for my practice?

[00:38:49] Dentrix has invested more in the ongoing evolution and optimisation of EHR [electronic health record]. How could Patterson Dental better leverage some of its EHR software to attract new customers and expand those relationships into the procurement and equipment sales side?

CB [00:39:08]: I don't want to sound like I'm repeating myself, but I think for them, it's going to be how do they simplify the integration. One thing that I think Dentrix has done well is they've figured out a way to allow lots of different people who bring lots of different offerings to the table to integrate with Dentrix in a way that makes it easy for the office to use, and I think Patterson has an opportunity to continue to figure out ways to do that with Eaglesoft and potentially with Fuse down the road, if that's what they choose to do.

[00:39:44] How could Patterson Dental best restructure the sales approach for Fuse to compete effectively against dedicated inside software sales teams or rivals such as Curve Dental or Dentrix? Are you potentially seeing weakness in sales representatives that are trying to cross-sell consumables, equipment and software?

CB [00:40:05]: I'll answer the second question first. I do think that software sales is a different skillset than selling consumables or equipment. Your top salespeople can sell anything, but the vast majority of salespeople, it's a challenge. Salespeople sell what they're comfortable with, and it's a challenge to get that big of a team, whether it's at Patterson or somewhere else to understand enough about the software to feel comfortable selling it themselves. In terms of how do you get more visibility to that, how do you get better at selling it, it's really building out that team of software sales specialists that can partner with your generalists and sit in front of a doctor and have that conversation and be able to articulate the features and benefits and the value proposition and all the rest of it. Until they figure out how they're going to move forward there, it will be interesting to see what the next moves are in that space for them.

[00:41:27] The aforementioned expert also noted that they believe dentists refuse to use unbranded products in direct patient care, limiting Patterson Dental's opportunity in private label. Do you agree with that claim? How successful is the internal push to shift customers towards the company's branded private label products? Is there pushback from dentists?

CB [00:41:57]: There's a lot to unpack there. I would say the claim that dentists push back on using private label in direct patient care is only partially true. I think they're more likely to push back and need more evidence of clinical efficacy when they're buying private label products that they're going to be using in direct patient care, but there's plenty of evidence in the market to suggest that it's possible and that they do. Patterson sells a lot of private label product that's used in direct patient care, so does Henry Schein. Again, when I say dentists are more likely to push back, when you're thinking about things that go in the mouth and that are going to stay in the mouth, dentists are really concerned about track record, clinical efficacy, studies, research, all the rest of it. A lot of that work has been done by the branded products, and that's what the dentists grew up… That's what they were trained on in dental school, and that's what they've been using forever. It's normal to expect that there's going to be more resistance to change, but there is plenty of that type of private label product being sold in the market to debunk the notion that they won't use it.

I just think it's a more challenging sell. When you think about it from the perspective of a sales rep, if I have a doctor who's buying a Solventum bonding agent from me, how excited am I going to be to go try and sell him the private label version of that? I've already got the business. Yes, it might be a higher margin, more profitable sale, but it's marginal. It's marginal in the individual instance. When you think about the cost benefit, how much time am I going to have to spend to get this doctor to switch, I think that's where you see some resistance. It's both at the… You're going to get a little pushback from the dentists and you're going to get some pushback from the reps on that. I don't think it limits Patterson's ability to sell it, though, because I think Patterson, and I don't think this is a secret to anybody, their private label offering is not as robust as their largest competitor and so I do think there's an opportunity to continue to build out that part of the portfolio and continue to offer an alternative to the part of the market that is open to that.

[00:44:26] Are there any avenues where Patterson Dental could cross-sell? Are there any other strategies the company could pursue to deepen the penetration of private label products, despite some of the pushback from dentists and sales representatives?

CB [00:44:42]: One of the biggest barriers is Patterson doesn't play in as many of the specialty markets as their largest competitor, or if they do, they play in a much more narrow way. They might have a much more narrow offering. By the way, those specialty areas tend to be the faster-growing parts of the market, at least currently. They have an opportunity to potentially identify areas where they don't have a broad enough offering or an offering at all and then what could they do from a private label perspective to enter into that market and to give their folks an opportunity to sell something else and sell something new in a practice. When you think about the general practitioner, they're spending a lot of time thinking how do I keep more procedures in-house. Those procedures that they want to keep in-house, they've largely referred out to specialists, but if you don't have as broad of a specialty offering as your largest competitor, that puts you at a disadvantage to capture that potential incremental business.

[00:45:54] Regarding specialty segments, how can Patterson approach expansion into endodontics or orthodontics? Is there an opportunity for organic growth within the company's existing portfolio, or do you think it's going to have to pursue M&A to bring something new in?

CB [00:46:12]: I think it could be both. I do think there's an opportunity for organic growth. They have enough of an offering that they could sell more of what they currently have, with the right amount of focus and the right amount of training and the right amount of incentives and compensation. Having said that, I just got done saying that their offering isn't as large. They could go out and find new partnerships potentially to help fill in some of those gaps, whether that be via private label or branded, but they may have to do some M&A. The challenge with the M&A, though, is that certainly not all, but a lot of the large M&A opportunities have already been realised by others. When you think about the brand names, think about if you wanted to get into implants, the largest implant players have largely all been snapped up by somebody. Then you have to decide, "Am I willing to pay the money to buy somebody and then have to build their brand up to the level of somebody else's brand?" Because it might be too late to buy a name-brand, if that makes sense.

[00:47:25] How could Patterson Dental best position itself against larger players who already have a footprint in the specialty markets? How would the company have to go to market with that to present some type of value add?

CB [00:47:39]: That's a challenge for them right now. They're going to have to look at some potential partnership opportunities, maybe some JV opportunities in order to bring some of those solutions to bear, some co-marketing agreements with companies that have the product, but don't have the reach to get into the dental space. There's some unique things that they can think about in terms of how could they go out and acquire the ability to sell some of these products without actually having to buy somebody or create a whole new piece, new division within Patterson to go out and sell it. Because in a lot of these, there's a lot of expertise that's involved as well. Not to harp on implants, but you're going to go sell implants, you're going to need to build out an implant-specific sales force because your generalist just isn't going to be able to do it. I think they're going to have to get creative in terms of how they think about partnerships, distribution agreements, JVs, things of that nature in the absence of pure M&A.

[00:48:49] Are there any specific partners that come to mind as low-hanging fruit that would equally benefit Patterson Dental and other players?

CB [00:49:02]: There's a couple. If you're thinking about ortho, American Orthos [Orthodontics] is somebody that I know Patterson has a relationship with that I think could be an opportunity. There's some smaller implant companies that are direct right now that may not be getting the traction, the non-US-based implant companies that they're not getting the traction that they want that they can potentially look at. The M&A part of the business moves so fast, I think I'd be speaking out of school if I threw out any names, and I wouldn't want to throw out any names that potentially are already on somebody's radar and have that cause any issues.

[00:49:53] How are inflation, tariffs and the overall macroeconomic environment impacting dental practice spending habits when it comes to selecting white label or generic brands vs a branded products? Is the desire to save cash becoming more of an incentive for dentists to go to a private brand?

CB [00:50:13]: I certainly think it's a talking point. It's a point of conversation when a sales rep sits down with a doctor and talks about how their practice is doing. This is one that's overlooked a lot, but I think the bigger issue for your average dentist is what's the employment rate. Dental insurance is the biggest driver of patients going to see the dentist. Obviously, pain is the biggest driver, but dental insurance is the other driver, and that's largely dictated by employment. To the extent that rising costs and tariffs and things of that nature have impacts on employment, that's certainly a topic of conversation, and I think something that will cause dentists to be willing to take a look at their broader spending and be more open to conversations with a salesperson around what might we be able to do here to offset some of that. I also think that tariffs, especially when you think about equipment and technology, that's maybe where you're going to get the bigger impact in the short term, is driving up the price of these larger ticket items that could delay some spending or could accelerate it in certain cases if a customer or a doctor feels like they can get ahead of something. Those are some of the drivers that doctors are open to having conversations about.

[00:51:49] S&P Global analysts are estimating Patterson Dental's revenue growth to be 1.5-2% in 2026 and bump up to 2-3% in 2027 and beyond that, stabilising at a 2.5-3.5% annual growth rate. Do you agree with these projections? What do you think are the most notable inefficiencies or strategic blind spots that the company needs to address to strengthen its market capture?

CB [00:52:20]: Those numbers sound directionally correct to me. From a revenue perspective, I think those are pretty spot on. Do me a favour and repeat the second part of the question.

BV [00:52:34]: What are the most notable inefficiencies or strategic blind spots that Patterson Dental needs to address to strengthen its market capture and drive its growth rate?

CB [00:52:44]: I think the efficiencies continue… For Patterson, their biggest opportunity is in the e-comm space. That's not been a strong suit historically. They have an opportunity to really build out their digital ecosystem, both from e-comm, digital marketing and that omnichannel approach. I think that's a huge opportunity for them. I don't think it's a strategic blind spot. I just think it's an opportunity that it takes time to execute against. Again, I don't think it's a strategic blind spot, but I do think a big opportunity they have is in that DSO, call it, strategic account space. How do they lower their cost to serve in that space by leveraging automation and leveraging different systems vs using human capital to do that? That's an opportunity for them to continue to expand in that space in a more profitable way because that's just a hindrance. If it's not as profitable, you maybe don't invest as much in it, but it's a little bit to me of a chicken or the egg.

You need to invest in the systems and the automation in order to make it more profitable so that you don't feel like it's not worth going after some of those pieces of business, which I'm not suggesting that that's how they feel, but I just think there's that inherent hesitancy to, "Man, we're going to throw all this money into this space that we're seeing declining margins in." "Great. How can we alter our cost to serve there so that we're more willing to invest?"

[00:54:38] Patterson Dental has pursued margin expansion through various initiatives such as WFO [workforce optimisation] and procurement initiatives with manufacturers. Analysts predict a high 4% EBITDA margin for 2026 and are anticipating these initiatives to yield a more observable benefit in 2027. That's a pretty vague statement. What degree of margin expansion do you think the company can realistically realise in FY27? Do you think it's expecting something above that 4% EBITDA margin for 2026?

CB [00:55:37]: It's probably more than that, but not much more than that. I know that that's a wishy-washy statement, but it's probably 5%-ish maybe in terms of margin expansion. A lot of that is going to be dependent on their ability to execute against all the things that they're working on. I mentioned a couple of them. When you think about the investments that they're making and when you just look at all the folks that they've hired in executive positions, you can see the direction that they're leaning in terms of whether it's private label or whether it's their digital ecosystem. Those things are going to reap some large rewards for them.

I don't know how quickly they're going to reap those rewards because it's just going to be dependent on how quickly they can execute against them. I agree that it's likely not 2026, easy to say because we're in September. Maybe that it will be slower in H1 of '27 and start to pick up some steam in H2 of '27, just based on the time since the acquisition and the new leadership team that they got put in place and the plan that they're trying to execute against. I have a lot of faith in that leadership team. I think they're a bunch of really smart people, but again, there's a lot of moving pieces. I would expect it to not be maybe as quick out of the gates as folks would think in '27 and see it pick up in H2.

[00:57:12] Is there anything else you'd like to highlight surrounding Patterson Dental or the overarching dental distribution and software industry?

CB [00:57:26]: You mentioned software. I think we're going to see a thinning of the herd in the software space, and I'm not necessarily talking about the practice management space, although I do think that we'll see some in that space, but if you look at the landscape in dental software, there are so many players. When you go to trade shows and you see all these different providers, everybody has got a mousetrap. You're going to see a lot of consolidation in that space. You're going to see a lot of, like I said, thinning of the herd, companies that just aren't going to make it. I think that will be interesting to watch over time and who's able to capitalise on that and who gets left behind. That will be something to look at as we move forward. It will be interesting to see, in the DSO space, what happens with the growth rate there. It's still growing. I think it's still growing faster than the broader market. The growth has slowed.

What's going to happen with interest rates? What's going to happen with the cost of money? Has the low-hanging fruit, the private practices that are worth buying, have they largely all been snapped up? What's going to happen with some of these overleveraged DSOs that are out there that private equity came in and they spent a lot of money, and now they're in a position where their partners are going to want to get some money back out of it, and they're not in a position to sell? Because they've not been able to find those efficiencies and they've not been able to juice the bottom line, their EBITDA to a point where they can make the kind of return that they want. There potentially is a reckoning happening. I think we've started to see some of those dominoes fall already, and it will be interesting to see what happens as we move forward in that space.

BV [00:59:29]: We will now conclude the Interview. I really appreciate you taking the time. It was a great conversation. Really insightful. Hope you have a great rest of your day.

CB [00:59:41]: Absolutely. I appreciate it.

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