PETQ - Earnings call transcript Q4 2019

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Operator

Greetings. Welcome to PetIQ Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

the to turn Sonnek, now will conference Jeff over IRC. I you. Thank

begin. You may

Jeff Sonnek

On Cord you Good Officer; Sholtis year also and call. quarter afternoon and Q&A. XXXX available for present call for conference us Financial and is thank John joining Newland, on Officer. Chief Chairman Christensen, and PetIQ's Chief fourth earnings and today's Executive be are Susan full will

meaning forward-looking and of management's course begin, federal of during this from statements and described please within uncertainties may management current involve actual we These the Before laws. those materially and the in make the on securities could statements beliefs remember call, based forward-looking differ these that events risks that are and expectations statements.

report filed materially to other annual the and discussion in any XX-K Please risks release forward-looking the company's Securities detailed could the on from results expressed Commission with today cause refer made reports differ and the or today. issued of statements implied from that Exchange those press company's and time-to-time a Form for to actual

management Finally, income, refer among note EBITDA and call adjusted measures will gross today's on financial adjusted to certain net others. including adjusted please non-GAAP profit,

useful company to presented information in non-GAAP measures the for information information financial isolation with substitute of the considered financial While or presentation accordance for in is will these the be provide investors, intended believes this not as GAAP. a

financial of accordance Please to to with refer non-GAAP most measures comparable release reconciliation the prepared GAAP. for the measures in today's

supplemental its presentation website on for addition In has posted reference. a PetIQ

call Cord to like Now, turn Christensen. the to I'd over

Cord Christensen

brief business close XXXX, highlights and XXXX everyone. XXXX afternoon good in will results more into look our in financial since a business quarter with our John insights at detail. IPO our and segments. will our fourth and key outlook review performance, provide Jeff you, discuss Thank I

your to and Susan, available John, be will questions. Finally, answer I

has and net to a the business gain PetIQ services, in products At by convenient and ago, net XXXX. is years Since ability to half access PetIQ, gone a veterinary just of sales to of $XXX provide model business our million continues end to illustrated million sales generate and growth. momentum, our and from by least IPO, sustainable in an generating affordable $XXX our at two XXXX

grown the million of XXXX period. CAGR CAGR adjusted and closing EBITDA time This has $XX EBITDA XXXX in over rate this in an net XX% EBITDA upon represents Capstar expected our Adjusted $XXX adjusted from to of run million over a annualized acquisition. XX% sales

Net increased EBITDA with veterinarian In affordable XXXX, pet health services indication is we growth. sales convenient providing to of is parents increasingly pet adjusted and increased products XX% XX% mission and XXXX. generated This care. that to compared another access smarter year strong clear our of seeking resonating a

acquisitions. via both accomplished organically growth strategic and We've this

compelling opportunities Our to team and has industry business. of job done finding diversify growth for a strengthen further in products complementary the veterinarian great services our and

us agreement XXXX. couple In recently to margin have in be the while yet enabling fourth our the We years, last improving and of acquire consolidate signing integrated enhance higher acquisitions. Capstar position of will three definitive the of a This strategic our competitive acquisition again our mix sales. industry we to announced

XXXX strong plants our in of services own visibility manufactured adjusted and beyond. significant comes and from us brands EBITDA control our and XX% providing into approximately XXXX, our our business for In our outlook

pet Health offering and health important PetArmor, pet accretive brands very significant closed the items, margin Animal Sergeant's. our is of than with segment. national The product July significantly of in and PetIQ this Health, state-of-the-art scale health provides addition the and SENTRY a strategy integration highly its component expansion manufactured XXXX, To-date, With expectations. XXX which such greater manufacturing Perrigo wellness and manufacturing our asset Animal wellness a and acquisition provides to R&D of is Perrigo as more exceeding our within

is had for we am believe to As this quarter we be call, approximately set good now a business. Health goal third growth opportunity business we year-over-year the initially that that the us pleased we for XX% in will expect report to during for I Perrigo XX% mentioned there sales sales outperform growth up Animal the XXXX.

After to made ownership. Animal marketing its investments support decision that was to placed important a to we the prior have acquisition, deliver re-implement we This that that Perrigo annual deceleration goal growth brands. our business closing XX% this sales on the in lack attributed the identified PetIQ Health most has in of the sales these ensure we under-investing to asset.

this towards Said differently, reallocated for this complete and that XXXX the budget million was that in approximately matches place to marketing beyond prior this of originally which have EBITDA we business and marketing forecasted applied for we budget. XXXX more advertising acquisition the spend issue Perrigo's and $X fixed have asset. historical have a for Effectively, of was

this increasingly expectations to this correct As for bottom through let to the high fall love have line, much we decision not that as the is asset business for. an we'd

business Shifting segments. to our

of business XXXX of year product momentum growth supporting continued with Our XX%. demonstrated XX% fourth quarter growth full

and grow category, manufactured to encouraging continue new with and number of consumer affordable needs care the transitioning partners is brands greater parents convenient their and we acceleration manufacturing from our strength health and which access offerings. the helping We animal in benefit market. relationships the pet an our of Through PetIQ's customers total into visibility, health to pet our increasing are

and all are motivated growth parties continue the Our partners together. with growing all win support to are us to and

pet with is us still opportunity of from all across category experience channel with Several programs. perspective. customers large from and prescription have sales leading strong to area drug ahead. is a e-commerce increased our a that We their channel to of continue of for its tailwind long prescription perspective growth commitment product an leading a drugs strong our runway infancy a retail in sales business This and broad-based

ecosystems is million the veterinarians the not industry which the over our value to that more these generated than XX% In Our of seen pets have a our of treated over in prescriptions. XXXX, over value pets, X.X prescriptions provide veterinarians and medication million X.X PetIQ's is three years. best write. aim treated to entire veterinarian XXXX example pet to the

growth When PetIQ, PetIQ you X growth enjoy. providing we partners one is with pets which to entire our more we forecast with combine to center number initiative million drivers will that the say and over wellness growth runway industry of grow be future category a the that retail incremental direct millions that pets the of link to vendor largest this to in our will at the will in the X,XXX-unit of treated a

and to services, brought XX% for basis an fourth a decision grew reestablished quarter the grew sales about fourth both segment a XX% the net on We underperforming following In quarter on with temporary host the that a strategic in by clinics reported year. or growth during was the close deceleration quarter adjusted adjusted double-digit some third basis partners.

negatively These by we Segment on the gross margin and fourth generating we in support the to openings fourth strategic business. investments investments was impacted the was desired quarter wellness as clinic new by for are back the generated XX% our base evidenced quarter community as labor growth center conversion. clearly results our marketing to

goal execution pressures XX holidays. center the of wellness particularly We additional of are unit service with organization's the growth the our around XXXX, the late in proud year in

service important the season. our is As we for spring business XXXX, well most entered positioned

PetIQ's created X,XXX pet the simple company In smartest the well-trained health summary, and in mission employees country. care has

health products delivering veterinarian best convenient life services and of and to The is and pet manufacturers mission pet their working. through Our pets, smarter importantly options affordable to resonant model parents. access retailers, parents most help animal for live with their is

Our results speak for themselves.

proud past adjusted in and more EBITDA the years, at than from any X.X other companies to grow million rate PetIQ of health unlike something is are have we XXXX. just $XXX grown the to revenues This $XX In million industry. million $XXX least $XXX expect run we is in animal million in XXXX from to extremely

We with medications services, have access a unmatched vertically to and product convenient distribution an prescriptions platform integrated veterinarian footprint and national value. OTC at manufacturing and

turn to I like call over would to now John. the

John Newland

completed multiple EBITDA regarding to clearly IPO. high-margin like greater and has you, this Couple a our moat with significantly drivers convenient This performance. we acquisitions in will Thank our growth EBITDA access XX%. long-term the than we sales a our we've goal are diversified accomplishments is providing strategic to adjusted remarks more generated demonstrated pet our of to that of stated competitive XX% Cord's expanding leverage since XX% business reiterate topline adjusted grow CAGR, aim margin affordable an I'd coming net our that years. with and to our care the a Cord. Having mission in

increase an Fourth compared fourth business. We great of XXXX consolidated XX% fourth XXXX. net or sales which phenomenal million of the a $XXX.X a to capped were million, had off quarter XXXX $XX.X the quarter when quarter for

XX.X% Excluding full the net Perrigo XX.X% sales for year Health and increased XXXX. contribution from Animal the for quarter

sales strong growth Our and Animal the sales partners contribution existing reflects retail recent Perrigo acquisition. Health from in

XX% services fourth Product year-over-year. an the non-same-store growing million, our sales quarter XX.X% wellness segment centers. net sales from within $XXX.X contribution growth a and community delivered Our our business clinic-based increase for same-store segment were of

Segment sales contribution for the Excluding the fourth compared of increase product was increased $XX.X segment Animal quarter XX.X% adjusted net XX% Health an last quarter. million, year. Perrigo from to EBITDA

revenues for increased XX.X% the fourth to segment net quarter Services $XX.X million.

of net revenue initiative, center the versus million, was from prior XX% services contributions a fourth wellness $XX.X adjusted our representing the growth Excluding XXXX segment year. quarter

like year would quarter. partners in I would the fourth in discontinued backing of adjusted in your attention prior we out And our the period, these XXXX two services to when clinics that retail bring in been segment the of were growth to also base have base. that XX.X% operations the

ended XXX.X% year result the and in as the and the before fourth wellness Non-same-store into as opening for revenue XX.X% same-store additional December centers sales of wellness quarter growth million million opened XX, prior and $X.X centers, a full XXXX. moving base. $X.X to well year increased as maturing, Non-same-store

compared marketing openings, we segment community negatively a and our labor the Segment to center adjusted margin EBITDA quarter was $X.X new quarter strategic investments was backfill via fourth million, the year. conversion. decrease to last fourth XX.X% impacted for of Services wellness clinic as support

to out thereby want is year incur. our margin negatively seasonality I that our here. of Fourth profile Importantly, influenced labor business volume is the quarter the service volumes call and costs lower lowest fixed by of we the quarter the against the seasonally

organization community great done as the fixed segment are feel to growth initiatives long-term our place. across lift clinic the sales offering about platform, and which we've is infrastructure drive work as already well in in will further continue refine we model. to counts enhance service direction the the that said, driving of pet the and leverage That These total that our our

million. grew Fourth $XX.X to quarter XXXX profit XX% gross

base at XX.X% grew of through the our to we lens However, $XX.X profit, looking business million. gross adjusted

significant demonstrate and gross improvement, to As as manufactured expect result into products. margin we look between mix improved distributed a our XXXX, we of

quarter, Animal we optics July integration to transaction XXXX Similar This to increased the in the is anniversary quarter our consolidated of through half this until first in in third Health trend into administrative will expenses Perrigo that a financials. the year. the continue the of general due of fourth and

rate business, variable which is Perrigo's XX% more offset However, associated in adjusted greater to expansion lift nice margin gross than Perrigo expectations margin accretive profile XXXX. is a than run EBITDA key higher our G&A Health with the in the deliver of a in by Animal

we than adjusted basis were the have for quarter basis. that would G&A achieved Excluding Health, an Perrigo points leverage greater on XX generated the Animal

margin a prior EBITDA the of million net year Fourth to XXXX adjusted adjusted $XX.X represents compared increased year from quarter basis to which increase loss X.X%, the Fourth $X.X $X.X in EBITDA quarter as million, prior was and XX period. period. loss was XX.X% point net million

income, expense net the additional of net $X.X associated that includes of which adjustments prior items, we the million Health. the Net $X includes incremental of of period. million XXXX $X.X expense, non-recurring and fourth interest with quarter million expense also non-recurring Adjusted excludes However, the which of year million in interest Perrigo includes acquisition non-same-store $X.X million these for was $X.X contribution. to compared loss million primarily reported purchase of expenses $XX.X of Animal incremental

had to XX, December of $XX.X now approximately cash as The cash and million sheet. balance the equivalents Turning company of XXXX.

our to available total million addition In credit liquidity facility, at year-end, $XXX.X million. which was revolving $XXX had our approximately

half as of million a $XXX.X XXXX, contribution of our X.X when of of translates compared on including year which approximately leverage Perrigo XXXX times forma to $XX.X of ratio basis to full XXXX debt Health net year a has first XX, adjusted EBITDA company pro and asset. December of Animal our million the net the The EBITDA

of Capstar acquisition. not for adjusted the immaterial Capstar, including acquisition, our ratio. EBITDA we Current change EBITDA reflect assumption leverage any does our the contribution leverage annualized sheet balance expect or to contribution debt pending from Pro forma Capstar to net an

support that leverage to a place confident we and growth basis simultaneously free growing long-term objectives, one-half that balanced our combination flow. turn of in by capital our cash structure annualized while an We on business can growth rapidly have stated product a achieve service and are reducing through organic

Now turning to guidance.

We we with announcement Health are that provided the updating outlook May. the of Animal acquisition last in XXXX the connection Perrigo

expect $XX XXXX. wellness EBITDA million, XX% center of to units of than net consolidated XX compared least pace This in and XXX clinics. the $XXX adjusted For opened XXXX, more we at new of sales openings openings our a million of least represents increase in at we

as These openings. the such capital investment. have community wellness base, host lower strategy stated labor center we new approximately customer engaged openings, operational clinic previously, our significant strong As retailer of feeder primary advantages existing the relationships future for representing XX% and conversion conversions our and is

As we cash positive flow for is and which risk improves believe accelerated, our success. our result, visibility ramp mitigates dramatically significantly to a

outlook full approximately the XXXX which annualized our Our contribute of on to revenue year million Animal EBITDA. million from of $XX reflects not incremental Health yet contribution acquisition and but $XX an include acquisition pending Capstar, Perrigo our does of basis of impact

we result, the a Capstar. distributor as vast As of already a act for majority

representing we EBITDA than guidance revenue will and the XX% our capture implies margin our of will revenues million, rate greater limited respectively the $XXX $XXX accretion run basis, on XXXX is a upon Including and results. versus exceed growth our be closing. So that Capstar adjusted XXXX XX% to million will more gain contribution,

our long-term greater closing, EBITDA very than sales growth EBITDA adjusted wellness In prospects. our adjusted growth are in excited growth in future confident XX% of center of margin our remain we and XX%, XX% remain including with performance XXXX We in objectives, net locations. and XXXX pleased growth an of about XXXX resulting

Operator? overview, Susan, With are available I that and Cord your for questions.

Operator

from [Operator Raymond Joe first Our proceed. is James. question Instructions] you. Thank Altobello Please with

Joe Altobello

Guys, good afternoon.

So guidance? the investments to prior and marketing that? question, made the in more around that that fourth wanted your I What specifically strategic EBITDA first in And a quarter. contemplated was get color was little million $X.X you guys in labor

Cord Christensen

the for Thanks Joe. question,

question I on the and finishes think the I'll let Susan million the take then she answering $X.X question guidance take after I'll that.

So ahead why don't go you Susan.

Susan Sholtis

XX want for rocked not delivering and the had. it. always to question Hi, definitely one the that The a know that. ever first going number of as Joe. completely services I we that I open answer recognize Cord. actually all Thank you're you get you, just The centers? quarter And team is up we've or for best is, minute to wellness did whether pause the really team

you want Number held QX. walk had another I X,XXX in launched of. additional to that that advantage took clinics we unique clinics we for and through XX opportunities in we one, community locations QX the over

partners for Second were brand-new those opportunity of partners probably nine and PetIQ. six importantly, more partners, happened this nine with

pet opportunities our invest will as look total QX. continue that's in that to to We were needed previously about clinic forward community continue significantly talked for to moving up funnel the support So advertising clinic our smart we events to that. in counts fill incremental and smartly and

Cord Christensen

at on your second of time we Joe expect that we come that had guidance at to is we're that waiting to investment here stage be reconciliations the been and and updated have question guidance, made. did -- our final we when contemplated recently on in strategic reiterated your through part guidance

we the the which we double over and the EBITDA the those also of long there guide. were that when grew reconciliations million our XX% fact by finalized, $X that XX%, were but extremely disappointed came we by little was of on quarter proud guidance we were year a of than still grew through that So is and short term more

has obviously been delivering XX now going XX, And a trend been on quarters. we've

well excited came again, we it -- all waiting million like the and integration small you we're were of and about reconciliations about still the you with So for something miss year on things how slightly short through had that that guidance. on acquisition also never kind it. very between on some were We're that. yes $XX obviously like did name But total going perform we a to

Joe Altobello

That's first, wellness to it. expecting along you Got those Cord. guess move that I centers? quarter. from do year. I retail any could early think for anticipate new are new all partners? the if the XX you're Maybe Or helpful, in guys opening you I Walmart the XXX, existing centers this with results wellness are roughly first of partners? Walmart And the with

Cord Christensen

Thanks question Yes. the for Joe.

with a Walmart XX the fourth total we we XX which first up of opened have in first of in locations quarter, Joe quarter. So XX

I She part take your of think can answer. let handle other Susan the well. an question very it I'll

Susan Sholtis

want couple clinics to flipped want the greenfield over talk I things. different Number that of clinics. to one, now about of about a Yes. talk I conversion to the have

So we clinics per we the per all if those November to opened past opened additional in had we continue five recall conversion clinic total that this well pet pets an plus conversions XXXX, that metrics: you on dollars revenue. summer perform

break If we've of as right client you they're base love those the see can remember with built months, especially gate we these now. which conversions and right because happening our of the of hot benefit through running that out We partner. the we retail because already start conversions winter to types is

year. Greenfield example. give well launched in are last Greenfield In I'll an clinics brand-new the performing we that regards also quarter fourth the to you of they clinics

months in pet closed that were were you XXXX drive count. If to measure most they veterinary spending are remember June we active of medicine August you take and the old through how Greenfield now ones clinics performing and in the the we those

February year the in we pet the those medicine only XX% of months per in of January, XX% are and to two veterinary and increases this by dollars months, clinics in after most to if increases have months opened the new Greenfield compare the clinics inactive And of XX%. been for just you pets seeing in

So right the are in doubt the direction. headed new a without locations

Joe Altobello

new existing on all with of partners? willing And new is openings in terms are in the take partners? that XXXX Or you to

Susan Sholtis

a But Right now be than we've but are existing that will they targeted new with partners, partners. for includes XXX XXX XXX funnel partners. existing built the our the we with with which currently deeper

Joe Altobello

Thank you. Great.

Operator

proceed. with is question Please from Jefferies. next Our Kevin Grundy

Kevin Grundy

John. start to this for wanted is I question maybe

of sure Just you to change? what question. do year-over-year come but guess model handy, -- of on expecting back for and I as to I'm think quite not Because drivers us the I this our you we in but the sort was have you margin. The the missing were higher gross two Street if to and parts a bit margin could maybe something, were gross well walk the

a I at been acquisition. the And guess mix there minimum from favorable have should some Perrigo

bit little maybe The what it, could would in think be a wrong? flow not So worse? COGs, be SG&A an unless through I would but investment missing came I number I'm that would something

if it were think $X additional a that's be would like million But I -- huge case basis the that the number it's points. not even like XX

gross to think XX about gets maybe So a And you can talk for walk next that the get is the us question basis point around to year-over-year why And decline. do maybe better you year. margin. us then

John Newland

Yes couple that's there But yes. of questions Kevin. a

When with affected were product overall expectations. year. business cost investments those about the on we factor right that that you which in were talk related ultimately which of investments I in a large when the QX First the sales we line is this margin a margin we find side of portion examine of made of in QX, of that labor believe all, of would that were

of a in And program throughout partners. of when -- conservatively health pickup additionally we in year. we vendor accrued the we the promotion a receive -- did our that one product did that that program. benefits of we the did last -- We had year-end year animal reconciliation But realize QX

year it purchase occurred. our just recognized as year is, this year so the with to it throughout was where happened and went What the an Kevin different volume off-invoice was therefore

year. basically anniversarying associated with you're pickup a onetime promotion So that last

year this though actually our say XX the percentage an investments than we made annualized on and things the those about basis. will despite better we're talking prior I margins were annual basis that points

Kevin Grundy

Okay.

would been really the guess -- as strong doesn't anything but there what strong, thematic through hasn't sort to seem it even hope So that to like has guess concerning. how as of is like it there's continues earnings be I as been. the topline much been I topline seem did much relative guys I flow guess has probably you

John Newland

Cord. No Kevin Yes. ahead remember go --

Cord Christensen

to organization company or you're Kevin the total referring overall? service

Kevin Grundy

Cord. Total company

Cord Christensen

we made significant have I improvements flow earnings Yes in think through. the

And I quickly think the to different have -- to very the is service that balance something lines always determining of organization. we're versus in job we going mix look we three three Rx people the over have move with of profiles. are to business margin as business trying get how the

to that was I deliver have point can forward. we We $XX to EBITDA organization It going is, period. still the in slight understand a margin. service is why our that but have John's think of to we margin compressed did knew budgeted controllable were during million miss a to that, time that this and plan we be part was a going going

To now through $XX a relates and moving on $XX expanding we say XXXX million of through acquisitions have lot $XX with we're the made. business. the margins million and earnings a and flowing expanded Our flow we've it when seeing Capstar, are margin $XXX we're in that were lot to million that not to through making at we going got profile million to leverage as the we of

your comment. exception I take So to

Kevin Grundy

$X in up was Is the I Okay. It's this correct? XXXX. correctly, that more million step just right. Perrigo in if Got for it. all Cord one heard on -- it

Cord Christensen

Yes.

historical their the had those to of data in Perrigo best-performing the based with transaction, the was the and investments cut were employee And with able investments base. So closed make to we on show and and on in brand us those left had get made after a the the able deeper get can productivity to in place not model that spends. Velcera shortly philosophical existing we that Sergeant's, you investments. weeds those the were were those from see team And approach the decline investments. being brands more

were drive increase, out with our the allowed gaps at topline to go focus, in marketplace, back of back As to expecting the and look $XX gaps place put we investments it the in those able us XXXX and the go for without million earnings. fill those

we differently, same said exactly in XXXX as $XX way money make the did would So we if million spend in $XXX XXXX, million. business the the on

they'll of out We are strongly to brands investments big that our part in of those that that that say that we've measured grow us will important. be we'll ability already We being best to feel met at Street. to -- we've XX% show we continue can confident strongly be the acquisition feel that a to the be and able that mentioned The

Kevin Grundy

Okay. Cord. just clarification the And

investment. permanent of So not something fiscal come a the that's is to going accurate? XXXX. in that's out that should that it think The That's P&L Is Street of

Cord Christensen

Yeah. investment And those let that spends decide use they're know we're to it We're we'll you Unless going we aren't permanent to see results and $X million. that the make producing are do if different. we return sure not we make that going elsewhere. the better a

be going find intended in to productive that that that and are removed just assuming were start how were out they're decline, marketing right but to we're place -- dollars in used place that drove of now years growth when So those at the for long-term. the for they we're the

Kevin Grundy

sense. the I’ll Makes Congrats it on. all. Thank it. year. Got pass on you

Cord Christensen

Kevin. Thanks,

Operator

Andersen with Please Our next Blair. William from question is Jon proceed.

Jon Andersen

good afternoon. And Hey, congrats the on year.

John Newland

your to Good Jon. Thanks, hear voice.

Jon Andersen

ask like cadence I'd ditto. for XXXX. to the Yes about

little quarterly the then guidance half bit with Perrigo talk guess, Animal with the in half. the So if cadence it you Health I first second about to a and respect more could impacting Capstar, rolling

there color be provide would helpful. you any So can

John Newland

Yes, at effect a I'll QX take full the adding consider should rule contribution QX right? Health Jon. this right? ahead we of in As year year of total and go the business, the the a Animal Perrigo we that. cadence, on you half, John. This the corresponding look expect is with and need effect X% to thumb higher to of When back

only year, had business our of last we QX. and QX Animal differently, said in Perrigo So as Health part

what should see is that change you cadence the expect this over occurred So that to year.

on what of Capstar full closing expect second disclosed We to part update know guidance your we the until haven't do the the date, really talked we but of deal question, the -- at expect time. we we the haven't impact that

Jon Andersen

Okay.

Cord Christensen

John Capstar I already add significant if a deal about his though. we to impacted will the were And of the think that distribution point of by that be topline mean, handling portion think that $XX we I just such transaction, only to you when closed million. the

of XX% impact clarity we the our XXXX, will how QX roughly seasonal in sales that see should And If you in of of right. so he XXXX and through of as the sales, then think were percentage just on XX% changes give you of our QX of but sales I described. John it flow said

Jon Andersen

of quickly current more How do talk and whether for kind bit about I what wellness run get on you rate positive? a kind helpful. little converted for the What's economics maybe thinking That's margins? revenue greenfield. bit Could Thanks. of centers? centers, more in your you've out do -- seen And about contribution you Okay. the to those little recent given you longer-term, cash the of how guess think a

Cord Christensen

Jon. question we've been is telling what the think don't than for our you. different Thanks communication I

be believe a within year. a conservatively, the On will we profitability greenfield,

volume. very We've than $XXX,XXX to sooner we will we're of number happen in them that seen year, faster But a $XXX,XXX that can confident happen a cases. be to of in Some in it within that. still be that conservative

do those of XX% being be will the able Some EBITDA more that over strongly that. than are locations midpoint provide margin we feel that to But that same.

results locations on maintained lot that a community based with the the and communication to them. But we're no customer there, of have what in we've through. run same the stick no of base, seeing again, coming we're out past in going starting with We XX-month the greenfield confidence initially previous clinics being expect

greenfield on on. we've out So more fun been think we've right information. selection we've should at I Walmart should of initial as But stand position give information use and standpoint, and funnel some our you to really to update by as these things now, make able been we we'll we that -- what from the seen get an count our locations we'll providing

Jon Andersen

Great, good great. to hear. That's

Just one more.

kind brick-and-mortar business, thoughts of your in with of or As or distribution to there the guidance, you status kind Thank retail on to whether six changed about thought XXXX last you. was anything Or that your is e-commerce? months it that there your quo three direct overall? has be respect

Cord Christensen

the John. for Thanks question,

when last think and driven you with three of we've about the relationships quarters how been our partners. off great our record months, had have I six think

investment driving is our said, and the we've business continue our we count bringing PetIQ business. in in growing and ways continue pet to invest the to to to partners, in the for a believe business As growing in continued the right motivation everybody

We have described the to we've their contracts that are we've described. terms always what and you

beyond this still about what the running. how towards we've that. be reflect numbers no seen we'll happens the of having change. But So, obviously year end And they're discussions strongly

in still So, a we're place.

just those we brought just likelihood the feel everybody and that the we participate We future There's stronger gets being channel here. incremental and our excited great of growth continue renewals. -- in the with grow help partners much the feel as and it have definitely that's like this relationships about business so through to

So...

Jon Andersen

color. for the much Great, Thanks so

Cord Christensen

Thanks, Jon.

Operator

Instructions] next Guggenheim is Westenberg Our David proceed. question [Operator Please Securities. with from

David Westenberg

market Perrigo, spending to getting new as there spending Thank the just some And out Capstar there? maybe that that to follow-up you. that. that, an you're a with to with use doing opportunity is synergies products and help Build

Cord Christensen

of the you -- part hear question. first we your were didn't Dave, Hey

I you're something. or think muted

could of helpful. question really the us if that your again give be So would first you just part

David Westenberg

talking is of you're When that Yes. prior midyear. Capstar? get marketing you'll to between towards I'm use acquisition synergies some between color reallocation that spend new Perrigo, basically that And to that any get your maybe some about allocated additional some any on there's spending is of Capstar product excess the development some there marketing there or products spend here might maybe spend, go in Perrigo your opportunity and trying just spend? into that R&D with additional

Cord Christensen

Dave. Thanks for question, the

like their clear right is directly to to are I first And business those business. healthy those we business to invested. at sure now, making that's were we business investments Perrigo it's bought and very being where the I growing supported and thing, the being brands money would drive think brands. And the to placed is properly that a XX% we're is make that sure that those at growth. allocated think And linked

information is will good brand that portfolio at that believe and no that it's made or an to Obviously, until the support when gets news we Capstar look it. integrated now right how into be advertise a brand. had that fact the plan being against employees, definitely brand we The there'll and great investments needed the investments rest support it. don't of get we And additional incremental with

You always spend. get bigger customers synergies your of with book business and have your you're a when when doing ad you

brands But the both being that total million the investment So across $X won't be synergies it's there'll made Capstar. and where at at at. Perrigo be definitely with

are I one point of off R&D. and is a our The brought the bull's do products. that different the very patent our leverage improvements, to last things are us, look and the eye at ways some health will all that with total benefit fits company hit to a strategy company of thing as items objective having stated we R&D that product total with has items investing come how we'll part benefit animal in projects have well being access about providing affordable extensions, that that at the product think to of enhancements, And asked which lot that will brand you we're is, of in

investing there That's Perrigo bucket And great some another brand where we're just improvements with have extension. the and Capstar brand both money and projects underinvesting time brand not already either. board. and enhance then working so, the the to we're on and We're

like Dave. you be I to those. about. projects for we don't our what excited to But think So, something talk we're R&D we'll talk different ready reasons. are to disclose to about competitive it's a bucket Obviously, Those are

David Westenberg

Can Thank of of XXX Is out is change Or bit in number? sort there XXX talk XXX to then, about blowing little XXX. number? achievability ways And you, it to a maybe to partner? above there's only -- Okay. much. retail bringing new a XXX achieve language other the any of you that very from just just of in from kind

Cord Christensen

Yes.

think, understand you lot The that easiest to I a estate of and we though the a we do that company in done is clinics as part we're we of become a has where have up fourth very XXXX, areas ramp What to time. all this XX opened the construction quarter think of that foremost from months the actually opening. proving clinics. and from real opening first period in clinics get support opening in three opening so major last Dave, balance if gone part short we've three clinics up XXXX of XX --

Having what like resource cadence is go the sure for we have area there. the our we and and the ready on in the veterinarians to handle right that they're in a both human making great which balance pace feel and techs hiring right

count just And with about and just operationally three cadence of operational XXX that all that we're come the comes that with then talk locations, operating across areas. pet amount and those of cadence you increasing opening lastly the balancing days the when that

right communicated think think year. to still get about it that of the XXX just if XXX single starting trajectory X,XXX and taking your to and that nine stick follow hockey lineup, hockey will to We to But locations locations to. locations draw maximize we've you we're on to continue every the I to graph

this above year? enough somewhere all be do below three XXX at year? of We'll We is the XXX do to areas. those deals look and deals that. XXX we as balance it we So have Will XXX somewhere to this possible of be to do done

David Westenberg

weren't Walmart if And revenue we're Thank other good your That's to can when -- that what great they making they is know relative were all I on shutdown our we I'll sure growth take model? correctly, make give clinics. in help don't that allocate you color properly offline. stores you. Thank that I to you you. sure closures? modeling any on finally necessarily But look because know there was the impact businesses. But to color. just at the we then gave around veterinary organic just

Cord Christensen

if don't know Yeah, have that I number in us. Dave front I of

to that is, the getting store ready one it or were included reality the we to were in think base. of that base. I anniversary Walmart months locations is closed But actually their the the had in sales just two included be of think I only

was minor was the little. the at were locations. the those so such underperforming they of closing impact And stores volume So very

John at half year as a look we our of the know back don't your year you the that and and is measurable. be that million think when being I'll sure give total last can in to I so you year, sales same follows definitely number with the make the of locations model in $X But the over would So it others. little about information correct up up opened

David Westenberg

Perfect. Thank you

Operator

is Robinson Our Bill Humphrey. next proceed. from Chappell with question SunTrust Please

Grant O’Brien

this on you actually Grant question. is Thank for Hi, for the Bill. taking

cadence, I at affect maybe heavily else timing? was wondering windows this the shelf distributed Just are going any obviously, had XQ. that's center and that would the And a throughout you. And or I limitation year. this reset rollout be on year. bit kind one weighted evenly there the wellness a anything of year side is this past to was wondering i.e. to if that retailers, on more quick Thank for little

Cord Christensen

go that? want to Susan, ahead take you and do

Susan Sholtis

of number in including; each as of one, timing municipalities partners quarter really Where depends corners the number that bet. fourth XXXX. feel good across it's permitting centers, we third but I retail those and built the about factors of second, for Bill our a over significant of well Hi, we've XXX on first pipeline appropriate on a you the and XXX land executing well too. we Yeah, to Susan. wellness want emphasize

cadence So out in the look the quarters we openings across of three year. those remaining at will this

Grant O’Brien

Thank you. it. Got

Operator

conference reached question-and-answer to the the turn for end I Christensen like would Cord of have We session. to our closing over back remarks.

Cord Christensen

employees to the Thanks of year helped of us and in us today. have the appreciate XXXX and joining our shareholders And and XXXX off parents such mission. all achieve a out you We an that have start its such us everybody that that obviously continue us. excellent to drive all in kick our PetIQ appreciate you thank strong pet We way. helped many all people of there for joined helped

quarter all us our you forward results thank soon So joining first you. Thank and meeting to today again you. very of reporting with to look we for and

Operator

conference. you. Thank This today's concludes

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

PetIQ (PETQ) 10 Mar 202019 Q4 Earnings call transcript