PETQ - Earnings call transcript Q4 2017

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Operator

Greetings and welcome to the PetIQ Fourth Quarter and Full Year 2017 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Katie Turner for opening remarks.

Katie Turner

Thank you, good afternoon and welcome to PetIQ's fourth quarter and full year 2017 earnings conference call and webcast. On today's call are McCord Christensen, Chairman and Chief Executive Officer; and John Newland, Chief Financial Officer.

remember make the meaning forward-looking Federal Laws. please call, of of begin, Securities may management statements I that course during the the Before within the and on materially differ actual forward-looking results those expectations These statements. that than from management's events in are and uncertainties based and statements beliefs described involves and risks could current these discussion that release Please Commission and Exchange cause the Securities issued for to from refer today and differ to risks statements the implied those Company's perspective today. of a results actual expressed detailed Company's could in with press the made filed materially the forward-looking or

Finally, please non-GAAP certain note to today's on will refer measures. management financial call

information for most isolation well to information presented While call. financial substitute and a non-GAAP useful and also refer non-GAAP refer measures the net reconciliation net a prepared financial for provide or today's on EBITDA for adjusted believes to GAAP. the EBITDA with will accordance will financial with as income, measures press accordance to these be adjusted comparable considered not as release is intended Management of a in of the as income investors, to Please GAAP. Company this in today's measures in information the presentation

For the to these calculation release. of measures, Company's press please refer

to the Officer. like Christensen, Executive call turn Chief I'd Chairman Now over to and Cord

McCord Christensen

our outlook of initiatives I thanks and quarter detail everyone follow-up provide will highlights and our for our us business overview fourth view discuss joining CFO; afternoon, recent growth discuss brief Newland, of will in our financial business. Good long-term for performance. today. Katie. XXXX. more to you, our then our Thank and strategic a and results will John I

PetIQ call make This regular recommended year-over-year. lives the I quarter-after-quarter results At allow and of answer to importance on continues and remain to by committed veterinarian Finally, will questions. mission the veterinarian pet care to better pet products. education deliver John parents mission significant our pet your open to PetIQ, we to and

of our net profitability. finish We pleased our very annual initiatives are growth with and strategic The execution drove strong record to XXXX. sales

the For million. sales XX% $XXX approximately to year, net grew

margin to $XX.X XXX was adjusted million XXXX PetIQ. and XX.X% of a $XX.X compared for to million or corporate year Our basis points increased XXXX. XXX% EBITDA milestones gross profit to increased significant

In our strategic addition complementary acquisition financial successfully record public and January we which in our identified Petcare we to VIP initial highly XXXX. results, completed of of offering the completed

increasingly convenience pet mass, health awareness, include existing XXXX customers. veterinarian Our and across by and we customers resonates with e-commerce. all and strong accessibility generated grade choice, increasing and goal and In we products drug, club, this of of pet specialty channels improving serve, new services wellness and pet and sales food growth

of growth. to ownership, tick that to access to that the e-commerce and differentiated category perspective PetIQ the pet pet is macro our is and take that service opportunities our fuel of broad well strong us portfolio importance to rising we aging where but plus partner a product or flea valued where continue solely created to convenient of all wellness with as leadership, will John. consumer industry the smaller challenge theme clear pets with believe growth offering them. total a customers would habits. returns future regular trusted For find achieve medications, depend PetIQ veterinarian is The find contribution sales greater compelling are we is XXX% and have net to choice on as of business happening evolution to accommodate a not the their our value compelling there over-the-counter our With which e-commerce and to their has drive variety and to on advantage increased numerous better in overview, intend growth a for but focused healthcare. customer preventives growth. that We affordable increasingly parents pursue and grade veterinarian the offerings, be and are they opportunities shareholders. to that opportunity trends pet pursuing pet proposition continue call it for relationships over want well and to growth the whenever turn be of we wherever choose strong From provides products to brief path to will humanization, had today's our much a go-to-market The shopping positioned PetIQ and services like strategies model for preventive Pet and us I it. to a

John Newland

anniversary our now review Pet increased Specialty the expansion of in quarter Thank to Net year. consider the in will for $XX.X to of I you, you XXXX. the XXXX for XX.X% quarter into quarter sales major is significant compared million of fourth fourth financial when increase summary. our the prior Cord. the period fourth $XX.X same This million

$XX.X to high of $X retailers. some as million to period. our our the expense which in in increase sales year a $XX.X We products This year. consumer due of percentage the as of category. we're improvements million, economies expand deliver finally, continues percentage growth related a in prior which gross compared our the products leading acquisition partnerships growth in last million was net or same health retailers pet January General $X.X expenses of of sales and consumer innovation awareness improved well of new VIP the retail were some net growth as administrative growing profit Petcare period margin a $X.X refreshed expansion and significant on XX% or and to million number million, The compared created existing period which as to pharmacies, procurement closed channel, as see and XXX initiatives primarily the in Gross strong our continuous the four the scale, XX.X% of basis great includes result versus realizing net points of of and in at of with sales margin execution our of XX. the value, were; prior year with to was a products in

of share Excluding a XX.X% net foreign associated diluted revaluation as as Petcare, quarter. approximately adjusted period. XXXX. adjusted of the margin million adjusted cost Net transaction to which of of XXX% associated earnings. From the million. the of million $X.X tax prior grew compared the the and year-over-year these $X.X compensation million fourth million expense for associated basis for with fourth fourth of million expenses, $X.X the of quarter excludes well to costs onetime million rate Adjusted or XX fourth quarter deemed of tax $X company by million G&A the expense sales fourth provisional non-cash repatriation perspective, of with million for net XXXX EBITDA asset, $X.X points compares loss XXXX compared associated $X.XX increased to net as net deferred with a $X.X quarter was million of Adjusted $X.X VIP X.X% a of per quarter with of of decreased to by $X.X percentage fourth of the in EBITDA a million Adjusted XXXX income $X.X in onetime of doubled loss net acquisition for quarter XXXX. or for the to the prior expense, loss public $X.X year the stock-based an year of the $X to Company's income in $X million period. the

a had pay the sheet. to with and increase Company's cash At XX, the Company cash IPO quarter, and XXXX. debt year credit end net revolving which $XX.X Turning fourth increases in the proceeds in balance working million of the prior cash of $XX.X reduction debt on million. million, by capital. versus down outstanding generated offset associated is the by of is receipt due primarily facility the The now July cash equivalents closed balance due $XX.X used to period The operations to of and of on an to

to up that corporate adopting we'll of on first will for wraps the disclosures quarter accounting some I'd remarks, the be of our the taxes, new with the and the in recognition standards share XXXX additional XXXX, modified XXXX, in method. Cord coming some our on In light perspective Before prepared influence revenue retrospective on additional course like structure of thoughts offer adoption shed be first adopting plans ASCXXX our we using new recognition the then and outlook of and month. standard, some revenue quarter

accumulated million to on cumulative be As adjustment this X, $X.X on will results. XXXX approximately guidance not no effect be a which restated. debt an result, will of periods Prior the of the effect XXXX have adopting will January

net XXXX to reducing practice. programs, trade result other corresponding third We consideration, of a second increase acceleration and expect thus of variable fourth standard and past in certain the to forms quarter in implementation relative quarters allowance accruals and the first of the of in with sales

have Additionally, certain expenses in in display the modest effect the the the the sold had will customer accounted associated our of time a at control the point transfer summarize, on occurred. these in Company goods To for classify as of of customer product which statement. will Previously, this as with utilized. costs to costs merchandising income cost displays period are

generate stock when our allocation from interest gross pre-IPO You a then of will B their of traded the sales with Class Shifting in reporting shareholders some unique some margin hold which receive to purposes partnership lower A dollars and shareholders value-added a recognized. to our will to The are passed impacted PetIQ G&A along positive organization impact the flow by shifting Class for sold going rate forward. previously an that common interests Class those cash this expects think public tax treated cost shifts XXXX entity, shares slightly timing Company to has translate as see hold We to of lower will Company upset with an is goods given that dollars dual-class structure public increase shareholders reform way tax Company. PetIQ tax are that in in convert cash Company's TRA. revaluation TRAs This to payer more discussed. the the structure shareholders and structure comprised it's benefit tax shareholders. in public in organizational receivable The the publicly not structured as the nuance to corporate earnings By and the which XXXX the beyond A along it's companies FC What's tax and who company among created of structure with IPO this public from The shift Class interest a directly important though stock. group pay B was to utilized the deferred a is during turn Company the we continue in B will utilizing the their and it's share non-controlling related forgoing our include receive actually to taxes that an tax the In asset ownership Class is as similar TRA, that income thus to The which on. the did have and today. generated some Class agreement matters. these shareholders A shareholders common a settled associated as practice, structures. entire establish tax benefit for

ahead, not rate to TRA. passed. will As FC in that we of which by the beyond XXXX new rate and was decrease we the the tax expect lack statutory legislation the and of XX% tax tax structure the our cash as generated impact a reflects The look statutory the realize rate savings result non-controlling the in reflect interest recent of excluding

put will and those the significant allow the are savings cash to dollars growing business. to Company those use However,

full XXXX XXXX acquisitions conjunction our PetIQ early VIP onto with shared announcement expectations that January. it's we in is in originally the year of reiterating Now outlook. the

in to million Specifically, the full range we increase represents of which XX% forecasting net an $XXX $XXX year XX% year-over-year. of sales XXXX are to million consolidated

approximately net with net mentioned products the The XXXX sales representing based forecasting to approximately the of in adjusted core of million, million off current XX% net also diversify forecast net veterinarian sales the acquisition representing an XXXX. $XX sales the PetIQ's in of year-over-year. will increase range significantly VIP are We sales to business XX% combined XX% mix for of expected $XX business services EBITDA XXX%

tax transaction. as incremental combined and operating Company's subsidiary, the assist this Please to be historically of $X.X financials complete recent We reflects for filing plan with webcast an with April call you can of the conference the annual following host expect Petcare note, company. contains new with to the the to preparation modeling as week rate additional transaction. business, ongoing Therefore, [indiscernible] review provided acquired within and statements pro PetIQ information community more expense financing next and The with that To weeks in evaluating window drivers which forma a conjunction investment better this of of to we legislation was also in businesses. our to tax first interest that Again, financial in allotted associated In to the we day of rate statutory align an diversified business and a expect transparency the expect result segment decrease as the will everyone. in close of the few passed. the process VIP new well the we the also the details continue measure the and improve XX the to XX% is follow for expect realize million a information. the we are with with our understand healthy each attempt of work, further

us part overview. release. concludes first we close our remarks. now turn Given will the I and quarter, XX-Q to expect quarter Cord back for first related filings be Cord? to earnings our financial the call during our transaction of the closing This

McCord Christensen

Thanks, John.

forward XXXX, products and demonstrating As company of recently and addition we VIP. with kick-off platform. are the and veterinarian look the And to of undoubtedly we value services health a strategic diversified we combined wellness pet our much more larger

health Their PetIQ, reminder, retailers approximately allowing a offices a provider mission comprehensive wellness services providing provides portfolio pet through VIP VIP medications. and access pets for a suite consumers services and prescription wellness X to services preventive include by full XXXX, medication, XX to clinics as as wellness services of it's and clinics. health regional As of at products pet a million broad pet at health and community affordable We local solutions. of corporate centers VIP's at products and and In strategy believe our believe long-term. served include distributor and pet PetIQ's to to wellness convenient diagnostic and growth veterinarian that hosted veterinarian over improve value it's states. to quick well for announce have combined really to wellness drive relationships we Today, or a and products in new anyone across suite strategic have opportunities the callus opportunity to shareholder of we in our each companies. the step also wellness leverage and is VIP first others will services, this or we and are are a tests, managed excited XX vaccinations, the and choice checks. micro-chipping leading

agreements with veterinarian to definitive XX Walmart signed clinics. have We open

team with The time very locations been to I'm XX expansion of first cross-functional of X days. XX will open of next short Petcare first our leverage fuel capabilities our next able all locations our the clinics. in a opening over PetIQ proud period the who incredibly and has

this to consistently category and last service new partnership know, has strengthens with of ways products of Walmart you believe further innovative over years their recommended help grow veterinarian relationship. our veterinarian We several been and many valued the they a pet and have As wellness partner offering. our health supportive PetIQ's pet of been incremental

spending current open retail clinics we help billion company incremental through fuel over over locations adjusted believe the five reach an than these services XX% future over XX,XXX packaged expand excess our will expect X% products our to of and overlap $XX From in in that To EBITDA a locations. $X XXXX. partners on to total owners locations bags partners than and X,XXX similar this veterinarian veterinarian veterinarian Today pet opportunity VIP billion locations perspective, need of PetIQ both and no veterinarian products in to will In significant [ph] XX $XX to creating representing margins XXXX. project XXXX with service by billion industry in less sales net serve retail addition, spend nationally and next We we almost more with years. services. accomplish to reported for

beyond and to to us owners to pet partners continue model the pet help out that and believe that customers retail need underserved convenience of their provide will believe group the These our of our and large we of convenience, incredibly goals. to that help dedicated very providing achievements affordability year there for associates PetIQ work due exceed pets not summary, a fuel We education, year affordability XXXX is but a has our PetIQ, throughout lots and enabled hard team for owners pets their aren't projected. been only care good I'm was growth are of what In the us proud awareness.

long-term retail their are available We take generate value well continued your We our shareholders. incredibly growth as XXXX, our are excited for business. pets, strategies as with strong and and for our I prepared pleased and remain against to partners, remarks. are This concludes momentum John to the and questions. pet committed to Operator? parents our executing opportunities our employees about now

Operator

Oppenheimer. question question. Nagel proceed of [Operator with Instructions] Our comes Brian from your first Please

Brian Nagel

margin saw this is schedule about [indiscernible] integration that line My think sustainability first sales you VIP about into third as in time still question [ph]? side, didn't Consequently the is, side, guess gross on for with you gross on drivers with the margin basically going of the but the and the quarter. I

McCord Christensen

Brian, and and make right I miss your I going anything percentage manner not you in question? that seen the pickup our our talked then of we've connection the in I increases about a what is the reality we've year is real the you're repeat I'll between for gross as nice think continuing margin last that in forward, asking didn't back margin for seen gross you -- that and but and sure guess clear.

Brian Nagel

correct. that's Yes,

McCord Christensen

those and getting but our staffing to turn the things as to momentum in do how partners that see is and supplier we're focused Look, door provide been Company stuff to opportunities enhance threw things the as benefit and it more that have significant doing profile. us our disclosed out as continue mature of that able both the just on in our matures market, mix execute we synergies of well not and our job, our are we lot the in seen had actually for that and partners that better we dig we've knew continue great there area, we a out we we've to to have we a IPO margin in

to what predict do the good As that completely what's area and but we a that is will pro the we guys on solid to forward of you talking can't future next we deliver we company overall opportunities we've in look with services. model to Company these as a continue weeks and base until feel sustainable way like strongly that about got the improve find margin the the as introduction changes with we few the forma's

Now the that walk the margin you so to service product and guys. we're with business anxious significantly the is than profile business better through a side of

bit Soon, I at have PetIQ start how think as about different we're your question think margin will we the be little unit economics of and there a to -- get what you doing how our we applies in to services our having is overall be of business and leg and third in grow has stool that the mix. factored that how this leg which that now

and real about and as want of going conversation. get we no don't to pro So filed have to it's these the it talk sustained improve be but right continue now, Brian change the rest forma's to we

Brian Nagel

the you -- -- actually One the some of that the of products core does Can accuracy talk any as that VIP. you idea is, as have in laid of PetIQ of with synergy about well? what's there the talk question for or about VIP help of -- out this your more how now earnings for we integration towards

McCord Christensen

you we the business. roll going and because the you and with relative think question Again, rollout at of to synergies to of the out just talked getting repeat how Brian VIP mix generally the about connection look product great but we're I integration I'm not the

seen the VIP think any better demonstrated what couldn't I be synergies today. you've just announced better than as

you up and not put of operating short it's wasn't we'll with closing growth allowed best a thing VIP lot states period of company platform say was of time, come that stride of to the XX a VIPs clinics we before the us is a said hitting really week opening a a have it together, leverage announced offices regional that -- we we've acquire two in together and again, and think agreement, to that We the -- and open XX very position in managing to had just we be two time locations already nice there now strategic when agreement next relatively it the plan signing PetIQ in to stores. best XX when and more market had across and and mature

to further. our a So reach we've could ability productivity the synergies we great got PetIQ great blessing of and as and well accelerate set just give think them of because and the and a customers is access great and the and can willingness people to new I business relationships that business their take their

serving So their veterinarian the Obviously how such about. and the path mode us they look affordable and operators well recommendation to locations for they owners really either customers pet healthcare to mix our platform pets and in in XX to our to as or for and number value help of synergies their and over help and creation Company's find we're is providers whether how in being chain in pets million the one to from health food of to lots to having increased a forward some a creation providing participant secondly, demand of product we're implemented traffic we the that by Obviously, million to us food excited traffic that veterinarian to there us written every how Obviously, those a now start want providing opportunities partners have are that the strategic build value and and work it's obvious our the the pets making sales of demand at of that years pets country. If a we healthcare that largest clinics. looking and strengthening of having excited will and that retain together. number seeded well. that the there overpaying as the convenient animal in is and giving lots market, X retailers prescription increase can not product of access we've looking we how days we're of the already pets quickly healthcare initiatives them them to that next mix at just over and those last be a and clinic about at things X -- of significant

excited pretty provide going it, what now and it by so having faster. anything just screw we're not about resources So grow them the keep companies and and more them up are very access in because we're more to to well can they've go either and we make different better doing help to done

we at there. point, figuring much we're still synergies endless So is how monetize this as see the there

Operator

question next comes Humphrey. SunTrust Robinson question. from Chappell Please Our Bill of your proceed with

Unidentified Analyst

out point expansion, further of to the going clinic January; Hi, in in forward acceleration opening build would this view good to this that of trying early XXXX; a that, cost in guidance the year. coming the and bit clinic kind stores when hit do years? contribution kind of to announced I Bill. or of afternoon. that wanted on or you from figure by from kind this we the Is for [ph] stores assume some be them expansion provided revenue the steady guidance rollout This does an just Walmart is dig about or meaning actually was just your the mean to to going kind Stephanie out? of how barely per your this then And the X,XXX on XXX a target work

McCord Christensen

with very Walmart value total the and a services allowed level once the the way had knew we and into us forward of to level that we today during I base, able them conversations quickly, would some high various being get to our of about some were was lot do high during about to that ultimately, had we the there the and able time of we retailer that things got out that and as on would same started agreement of conversations today. view Walmart then got were to January up we into and our with that do come to know to middle had going negotiation could we time specific not say the we more they discussions value were the very talking sure going we're we around to focused the due just that announced definitive simultaneous we clinics a be of start to just once an to things in definitely work was potential at diligence serious accelerating December early worked what going agreement, view having customers to period a move accelerate open project make We we and to and the of of early plans going so it some

per just it and leveraged we work, that timing to were at divide we we the the states something that's offices almost regional XX looked and locations were digest getting of to the two locations are yes, are to up of did, definition XX of tell the a across they offices rollout really we getting all when where pace. be that can single the we the at was in population closer schedule are didn't quarter, a was offices those XX at have we've offices and that easier, states where the the done position if every to we've signed that kind time and little is locations in our resources those something balance say into you strongly majority country what the even could we and appreciate numbers on schedule, a kind in a deal previous locations after you was open of at today XX pace it kind already of From the those magnitude schedule, right we've you just the with okay, XXX now; until so So much one open across that looked down right discussion. a are and regional of

assumed becomes weeks. in assume schedules do modeling not we'll believe about XX to you be this a we numbers do with all we the what it more as revenue schedule we when are The wouldn't and for XXX time We of are next contribution. we think include our significant XX more Now immediately. XXX, grow. share topline few discussed current specifically does can XXX Walmart talk it those forma But that becomes numbers clinics, XX it have something next information year that the become becomes any a our continues becomes talk about pro being do be will the in like coming EBITDA XXX, from number

year we've on from a been goes in we other months and do contribution. historical very what lot of you X this XX months we data have see the lot into that VIP is those first know first clinics there running months X that do, the For second and conservative significant a of will investment

sales So relative been to the we we number we'll the the do the capital position and another better the EBITDA. in conservative but investment? what's than do on have have contemplated believe the soon things, projected a John, traffic

John Newland

enabled it's whether contemplated well as have our expense or The statements. capital as capital investments expense actual been forward-looking

Operator

from [ph] Joe comes question with Please Raymond your proceed of question. James. next Our

Unidentified Analyst

about talking since I there. guess we're First, start I'll Walmart,

you got rate how clinics? of determine terms guys is you Walmart add or the In that it to the can that it you determines what expansion; of quickly those is expansion that to would the expect,

McCord Christensen

statements Walmart. Let's require doesn't our clear, to location around expansion via forward-looking be

be X,XXX that in to returns and and are we things believe locations those next having things will we have itself. need partners will in we space are sense excited available that other with if important more clinics will less existing expand plans but other are already that banners X% real locations, that the place and there just the were a can in in a a are We not there we year XX,XXX that paying those know well guarantee we to open place we into. already XX already of them, Walmart care and confident feel their is we part the great locations economics the we banners locations across on and that total is and of X,XXX process. them one so but full they partner in a and number retail for Walmart prove with are need other XX we operate this Walmart relationships available. expansion locations that with landscape already; that and vetting other great and with through in belief that place standing top the the and think strong of and their contribution partners rest us stores co-attendant XX important are is be have we of those have unit that clinics we retail partner that and estate the with than line at great go on nothing that But those as have people, VIPs revenue locations locations, retail very empty take only locations next in under we balanced generate discussions we're we'll have going significant about make we better available locations you're all says

Unidentified Analyst

How the cost terms should shift is put I'm from we million, think about? $XX of from And -- I goods; first of a revenue in or second the arms it my cost about $X SG&A type the of trying numbers half you're the talking guess million into standard around move to the how half? much the in new accounting the impact of into

John Newland

a thousands in startle, use that not term hundreds describing everything nature. I it I nothing. that's though, I the it's that significant in It's to term million. choose of When mean,

Unidentified Analyst

cash you there that deep forma have you acquisitions count pro share now back if debt closed? us give And can

John Newland

more the standpoint. and is count information our results on we'll XX.X share with are provide we Well, million and debt quarter from cash a where first

Operator

Kevin Our question. Please next Instructions] Jefferies. comes of [Operator proceed question Randy your [ph] from with

Unidentified Analyst

the wouldn't base Cord, but ask implied to touch particularly revisit on to least is that around $X number some respect at build on color impressive, at so you the the side or the the VIP XXXX can with business? what of the assumptions environment. in I is looking you in the in billion this like what out sales is

McCord Christensen

this type million your we've with performing you than close for it $XXX on the to forward-looking run to growth to is if reality and obviously what messaging we numbers, to $XXX and together really get is rates put those is, going a through The we're just what we've again rate. out now base on be million greater rates $X were been growth compounded XX% greater is we've of of growth The on been XX% first than billion we basis. thing next obviously it rate last business year those year those the and growth

$X the out we a number of ground number billion the driven the for a assumptions. in off there stake is So that that is put

put those a Some the Kevin. but unit clear of economics lot the is assumptions our with the will more key information clinic we of be growth forma's to pro when become a driver going

those how how amount to expansion EBITDA here realized. a to look to is lot and we we're be of think we take I what think the significant that with influence guarantee on we product rate going those to The when we the control line. we've do thing guarantee the VIP, is is the take for said the our adjusted top base and can control really a but opportunity information, acquisition apply we've opportunity in that over will economics growth at that more grow control outcome unit of exciting have now got we and an and everyone significant historical going to numbers a the getting that business, real to and margins of be business know have in drivers to

added of think we've Company business part third for to forward. a a significantly we've influence it I we've leg really at the this influence this and sales, So product done significant going as influence said gives stool, the margin higher and of opportunity us sales is services

to greater we put to just have so and this there going saying you a gives we're we've to $X more way. mark-up all we're really much what math there on And the going path we've get say been along profitable that's and in the forward that that billion a sense a get to security

Unidentified Analyst

can more top today? to by year specifics the line, to on segment. then we low end still guidance you for end; it gets you key the what is between get you the court high wait of to what one the I pretty see -- gets and guess And wide as variables

McCord Christensen

I've think Well, end communicated I high I could get there never Kevin. didn't if

those think target the and think middle. known we're just now don't the to put I in hit that we going you've by ranges

can high focused an to place, that ready to the hitting think to need against have to deliver have you the laser we show we're beyond. investments end the real we've the relative we think for provide a pro us accelerated I the our plans what on out have put the is sales XXXX business So in on to but here our information, agree be shot making to a I opportunity you that we put with range that an to earnings from perspective have the And we've really range; there really saying to deliver growth forma -- right have about foundation and our clinic grade in everyone had we're will plans. that solid in in

and of it's responsible filed pro is the the it a think to transformation conversation, wide think And I I range that forma's do give are to but through, have we business way the confident and next be have conversations. amount excited very the performance with the and until everyone so and granularity going but a able it's plans what that to file that we when we going the more means the we're is forward about as plans

Unidentified Analyst

there going of the to now is there difficult had staples issues. to have amount touch inventory you from talk With are etcetera, aware it's etcetera; take in about mid-teens how but it about discussion of current the about pricing, all or really broadly difficult growth. number the a business base X% of now things and you're Can specifically you that Nielsen the X on that off. to talk companies where is guys exciting on sure is environment; down tremendous some side Can slowing well I'm growing you're it's so in latest you retail destocking right kind things actually in lot is the maybe have and of understand -- business down you slowing weeks VIP which about data; seen of in the and

of it the what's can you worthy, expansion maybe plans. doesn't in broader guess Walmart, that capture on VIP on so sort aside environment; I a the layered the slowdown? does retail setting there comments couple driving So of guess is not And questions And there; understanding but that? of sort everything I the slowing Nielsen sort touch then capture of

McCord Christensen

and to those broader be who the so is general, there available. retail information in to much because in it best our is people out wouldn't think I be and believe there that I on read interest are around really environment, comment winning losing, think

year-over-year will 'XX business up 'XX Kevin. to 'XX is segment, significantly have meaningful every 'XX XX to and customers, be up across our from from We

value what every way replace that it deeper because is is we're layers works. a and more is required of [indiscernible] some This in in past significantly been channels for becoming X strategy own out segment, best, we've retail about we've organized our more model a previously seen and be not other the retail the the becomes back we're a means products awareness data revamp winners as seen item that -- data to growing are out year the business the there and have supply in than of report, the have longevity it of And not units the strategic pretty we channels too of the more time item years you indicator we last increases for our certain said drive than it's when we're kick-off traffic, talked partners the when PetIQ be basis that our in model slower times our when sales, we it move affect bit a usual which stores a particular consumer to zero better of stronger some will business major some programs on weeks, they items their that transferring a retailers a year-over-year caused don't in channel to some fully that which the it partner, product ability dramatic to the of of and is We've our in healthier put that bit and in, on if lower we you support do impact future. we also done annual up in in-stock doing the and put some to of with mode while better introduction was with channel you there which little could a it's being new Nielsen that and think inventory will great you it's us up So of extend balance growth little lot to online on revamp into and new inventory measure strategy of competition that always that about in at long-term our of skewed. went couple business, with due the having dollar cannibalized and themselves report to so business drivers going but and are losers our partners normal. a

having So right we in we've right we've months is a seeing some some best seeing time. we're been record doing for now months, well the so record and now seen one row, no and the so business and right again long things on-track business; a is concerned in the the for did two weeks days we're because of data

So, Kevin; I if ask I missed probably missed again something. X so questions,

Unidentified Analyst

or to terms noteworthy with inventory Year-over-year a in in timing in increase respect and the high the quarter retailers? relative change anything there to John looked bit increase shipments in sales; with

John Newland

crazy it the at change No, on all activity not for all, up in we today just was Kevin. really going that terms have gearing

at year be natural how a is to there door demands the positioned customers season We of have of timeframe. throws happy end levels the for serious out just and to demand happier customers' for so volume now basis right the at and it of In that the couldn't to I'm the we're that which occur. needs and a -- had to of going no, able highest to build the the the order that our we was our daily upcoming us say meet the still on meet meeting be in with we're

McCord Christensen

add believe it we could position market this channels a John's weeks we've big, quarter only same through to of brick-and-mortar a constantly the aligning communicating conversation we're -- of big I under our was, maintained and again better which comment big if process to part entire done. last took of position is, we into long-term we're December the A what Kevin, strategy X supply to year. be significant in the of get to the needs significant that some support to strategy caused true to us channel to take work of

said this door the to it's completely the at door in relaxed fast relates it's out it like inventory because So going coming as point. I that levels as we're

Unidentified Analyst

Cord of update Act? on Owners Any the fairness Pet

McCord Christensen

the Yes, think to having to meetings pet to on we obviously for it because last few hopeful we've on. owners DC right over choice. be We just some been the what's the of continue it's in understand we weeks, thing have going be back the progress

cremation a factor definitely welcome. of into taking veterinarians, own obviously, lot growth our that would something in will next likely the an clinics explosive the category own our in drive reintroduced but own it and and is House we and the the further XX a a that's days DC acceleration from we from XX in with be indications prescription perspective to Our hands in upside drive less believe both, demand of next and but days Senate the Bill again, to

Operator

Our William your Luke of from next question Christensen Blair. Instructions] question. [ph] proceed comes with [Operator Please

Unidentified Analyst

biggest base you winning drug be in space fill the the succeeded the have in on was grocery it's understanding going I I business; think any color will in wide wanted there our opportunities, that on that opportunities great. forward? update space Any your wide -- wide channel, is and an is on of hear your previously kind First to base space -- that

McCord Christensen

largest expanding country space start think the with owners drug movement being expansion about to that knows moving create we of execute, as year and wide and I for access business number chains the actually the consumer been we a able through that two they've we've and are together once watched strong significantly doors customers for value everyone that this, grow excited finished the adding this and always very doing start significant in and our pet with to existing things start and the year. also one we expansion and some in great of pretty show seen the the ultimately and inside relationship is so and We having toe able into to of in by get significant. execute We've out just spread to put

range the which this be service do million be of read year work roughly if would XX% print, and $XXX XX% base the range to business, that the what the better closer million we will million that also business to product you going we giving $XXX a So you product says on-track of $XXX $XXX be to and than we're to expected. million we're math and part and final $XXX messaged is thought messaged backwards, our to of so that we've the you really business we million

Unidentified Analyst

they generally had business that. to own know And versus guys been mix, terms any I then messaged that brands? percentages, updated in stayed to retail get thoughts constant that's wanted there I the any of change product in is distributed -- you on previously

McCord Christensen

that the for and still that more innovation that comes that animal the of of true, trend off factors to in, to bringing way the and driven right many things think we're places, to will and ultimately see front in had times veterinarian and committed driven like lot our for is sometimes be in stands doing to and we health market more us shareholders which still think size obviously showing of address we a recommendation a continue to the to of we forward so we're return to be we've mix what I off obviously growing size grow that path about the margin million sure a innovation companies it, can't going very we strong were from whatever we're needs Company we business we committed better prior products that services $X With in manufacture years both. control health the is but love to market $XXX million make business whatever animal $XXX business, generate get the stuff we our in able a to more $XX we business of addition always and to to revenue and and participating where and our and products the the Yes, services now kind stuff always entire money sell in so be is of make is, of that I the lot business billion of a is was our from in being for continue those be is a that our the doing comes that. make mix we're we've we'll what we ability said serving mix of world with and million at the

excited we're like. is mix year still Next that to look what about going

Unidentified Analyst

operates, permanent switching Walmart as then temporary is locations are And clinics to I'm that VIP assuming the I'm that correct? assuming opposed to new the so those VIP, --

McCord Christensen

an VIP X,XXX would type that very that So of a base fixed and operation. clinics about a and would in more be a Walmart clinics, and wellness When would when a be types nice clinics, we're day types has fixed both history and pop-up talking would wellness and wellness fixed we at talk that about would both and operates temporary of locations health we clinic type community health The base then in mobile of be health a clinics. base clinic. that a referenced time a be that store, is clinic be the the clinic,

Unidentified Analyst

those How you many health wellness do VIP does of or have clinics have? and now

McCord Christensen

mid-teens with that now, right number will up roughly during plans another teens the the right they XXXX open now the similar in year. We're

Operator

for I of to to reached we've the session. closing like gentlemen, and management our would turn the question-and-answer end remarks. back call Ladies

McCord Christensen

look when we forward you. in release first weeks as with your We help look very and information continue conversations to plans, successful forward today. information locations with our quarter having sure to all information our part and fruitful for April those healthcare to We're and a conversations. a have support execute as planning to Obviously, for of of lots coming the obviously, everyone pet more and again, have we'll XXXX. of we access forward another pets We -- have to be lot we've through convenient our a the of and to we available reward there everyone to and much great across we be continuing proud thank we then couldn't look successful us appreciate implement it that forward of lot affordable to appreciate partners many of associates, XXXX out and of parents more our time We first the continue earnings. you joining States. look to very and I'm everybody a in welcome our information Thank shared very us plans better and to communicate providing PetIQ United digest.

Operator

concludes conference. This today's

participation. your time. disconnect lines may for this Thank at your you You

PetIQ (PETQ) 17 Mar 182017 Q4 Earnings call transcript