PETQ - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the PetIQ First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jeff Sonnek, ICR. Please go ahead.

Jeff Sonnek

you Conference us Call. thank Quarter PetIQ's and Earnings XXXX afternoon, for on joining First Good Newland, On and Susan John Chief call Executive Financial today's are Officer; Sholtis, Cord President; Christensen, Chairman Chief Officer. and

from management securities remember a others. results expectations please and management's the the materially from time this company's statements for begin, detailed forward-looking we net statements may the the any discussion to are that forward-looking federal Before and those make of refer could current expressed of These statements. to course during gross non-GAAP differ of differ or described call, beliefs in that refer on laws. materially meaning with on to note actual made within and the actual Please uncertainties income implied and involve management the adjusted annual profit, those SEC forward-looking risks statements today's including cause events will today XX-K press release call, reports company's in the among that these Form financial and adjusted Please and adjusted issued to and measures, on certain filed risks from time report other could based today. EBITDA,

a accordance financial Please measures with reconciliation a measures for company is accordance presentation as measures today's information of in the non-GAAP the not considered in will this financial to most presented GAAP. GAAP. intended these While substitute to prepared non-GAAP comparable for release believes or of in financial isolation information useful information provide investors, the refer with to the for be

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

their the call respective locations. management remote Today, conducting from is

and other issues delays, We may understanding. cross the As patience advance in talk brief call. such, for minor your be technical or thank you during there

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

Cord Christensen

Service segment, provide appreciate Jeff. our financial and discuss in quarter quarter first discuss our us Susan you results. will everyone. today you, will joining detail Thank first financial to afternoon, We results Good detail. on strong our more John

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

into I global our operations. I'd we and our of crisis strength comment the across are COVID-XX adjusted and pet get and growth, business experiencing Before what health robust model EBITDA on improvement, health like wellness sales to diversified our

our prayers First and and out those foremost, virus. all by thoughts to the of go affected

time Our had rapidly improved of and leadership situation. in plans we I actions well. decisive ahead those say for and team place proud am executed plans crisis And to this took have

continued has health situation the retail number and the As has been veterinarians, pet associates, priority to safety evolve, rapidly of partners. to prioritize our and one our parents

other a to As deliveries at you'd staff that facilities. for fulfilling our our and distribution critical corporate expect, we've customer instituted orders employees environment and work-from-home and virtual manufacturing aren't

work businesses. and deemed have include, cleaning regular our These pet are and in essential affordable enhancing health care. our that been a procedures. staggering and the distancing are work We lightly and all parents, facilities we is online fortunate pet and privilege do providing access to safe responsibility convenient them we not valued partners, retail with serve take a This as our but heightened to of significantly schedules, facilities protect sanitation limited COVID-XX. ensure We spread facilities appropriate against implemented measures and not safety to prevent social redesigning to,

proactively We to and in taken working particularly immensely appreciation facilities, commitment to front employees, our are to line our grateful the on them. reinforce those our actions have and

February. was wellness we decision centers closed disclosed. as was easy, it of we And January services on growth for all XX. March and temporarily the right veterinarian XX, our segment, and on Due pet This but overall double-digit average clinics we not one. in experiencing we In in believe started and and to traffic COVID-XX, centers a wellness month to clinics, close we and see ticket to March previously counts, reduction sales were started the

segment of in more operations March variable and month it the reduction first was closures. approximately to The during to of cost the consolidated the these significant adjusted $X.X We $X in million from second our structure quarter to excess be due basis impact margin impact quarter EBITDA. segment closures will in Services the of Services closure to the estimated following revenue was costs the immediate million the anticipate in month following services of the gross X,XXX of in than points excess segment of the

time service financially. are our families employees to pleased we in support X/X suspending to to been of our we impacted this uncertainty, have of During employees our operations, Since continue their their and be a paying position wages.

the leading coming weeks our Susan tomorrow, Friday, and May locations new for the service certain in and and of to as reopening team normal be COVID-XX, centers to services begin of been of clinics result the We are reopening planning our we able the and optimistic months. as wellness about all fortunate remain a has X.

leverage $XXX of an model even sales million, of operating COVID-XX-related increase quarter. Now, financial shifting highlights. and net in our EBITDA team exceed million, proud record $XX.X come approximately of We impacts. our and an increase XX%, extremely XX%; generated a to of to together our adjusted entire environment of challenging they've for sales expectations demonstrating with I'm how diversified achieved and of quarterly cost our the the first business

we remain and do benefit financial While from the healthy profit Service position. contribution in temporary a we not closures, sales during segment

cash cash on seen existing facility. we continue and on financial revolving based increases have and our generation availability peak to seasonal inventory have While and with credit ample liquidity we receivables demand, under hand, in strong flexibility our

very goals. has a to operating able this ensure that put are in we flow Near-term, still CapEx in place environment our our conservative program achieve cash team also to

segment. Taking a closer look at our Products

increase significantly For business e-commerce up last QX we in the was a XX% sales of by first year. led record quarter, that experienced versus our

pets. sales channel Our to access this meaningful their use the increase most pet care prescription health business affordable parents to as safe this was and items for contributor pet

in retail manufacturing greater of have the the away surges from saw along than expectations March. shift consolidated with plan from both on our a Services in a room these acceleration XX% benefit channel allowed for we strong in acceleration to excess veterinarian This still with in all outperformed our the basis, to partners our traditional COVID-XX and growth. with future QX, our of Even segment segment. capacity lots facilities by offices. February Importantly, line January overcome we distribution Keep mind, with volume, created in ahead our in our and on us negative impact Products

the be generating Our is operational Products fully in second greater even and quarter. an continues acceleration to sales segment during

with reduced monthly due to but closed, remains variable cost managing impact our segment a Service Our structure.

on are we of timing our our pandemic with the the estimate reasonable able not However, to full reopening on segment, impact particularly accuracy Services of all wellness the of and the centers clinics. financial COVID-XX

in and We sales product give also more As our the strength reduce will operations the from ability success. to outlook. our any economy perspective in the changes and health our pet segment. significantly on a believe weather first quarter, the the our a will of acceleration see result demonstrate result, in consolidated little as a annual any industry broader we the macro stability believe and with wellness health impact second closed results financial are financial To Services you XXXX we similar where suspending our of we quarter,

XXXX, discretionary downturn to pets, financial of retail the strong pet the most anecdotal today, fulfillment outperformed consumer And to parents in the broader representing continues rapid from across industry such of the acceptance adoptions e-commerce prescriptions, are based to trends, continued pet from back that believe markets. for on of trends and engagement secular humanization in tailwind shelters, seeing momentum, of the pet PetIQ. a XXXX as build the major Dating we acceleration emerge recent some pet like we

made well the product service to have few further business diversify last strategic sales our Over years, as as we and offerings acquisitions across channels.

during more significantly find PetIQ like which we made insulated, today. times evident has transformation business is in ourselves particularly Our

summary, mission help services convenience pets' delivering through pet In access enrich to to working. options lives affordable of products smarter veterinarian is and their and PetIQ's for parents

At integrated platform resonating an with national veterinarian OTC we in value. medications prescriptions uniquely pet manufacturing access and a well health at parents. our distribution diversified Our footprint and product our and complementary and to results the demonstrate remain unmatched model services, with growth convenient how PetIQ, with vertically industry and is animal positioned

look We well positioned are to believe enhancing and to for shareholders. we forward value long-term our objectives achieve strategic and financial our

that would I like call over With Susan. to overview, to now turn the

Susan Sholtis

COVID-XX you, Cord. provide onset our Thank I'll impacts detail services the pandemic. following around to organization the of some the additional

We off in double-digit Cord our executing rapidly center first new versus basis. was our key year strong our got clinic our start per pets growth completing fundamentals overall XX tremendous growth a revenue rate quarter. up by and We organization were pro the average This such ticket, initiative, as in services seeing efforts. to a As mentioned, was marketing were wellness improvement metrics, build-outs. strong on and growth driven and forma prior

specifically, the grand activities, remains environment, wellness the today. health even cornerstone And of marketing parents mission. believe our February. started relevant convenient health in which our smarter more affordable that, pet across care solution right to our and the of strategy today's helping out is gate More opening center This we pet localized especially early to deliver country in

rapid March. in to our and retail local in us in state forced with requirements, partners and conjunction However, host pandemic collaboration with some the make decisions

closed on by wellness closing protective around well a XX. to of started action availability temporary March tends in parents, given the as We and distancing, personal challenge March our host of we considered In services was or partners our was as model waiting clinic clinics the parents many customers. protect social amid our PPE. of that had And not that course prudent our veterinary all clinic, employees community essential clinics retail growing lines pet concerns states, for to XX attract of determined equipment, suspension

our critically ensure was that as we it services virtual to reopening important time, new components this model our we prepared engaged During remained adopted team and strategy. our

We X/X to have of their wages. field focused retaining and well-trained on at our labor team unique by continuing force operations pay our

Overall, and workforce, our nature to our reduce the has redeploy strengthen costs the business Services resulted variable to our to our business cost continue model evolve in in of the order ability model.

includes development the important pet PetIQ the as positioned adapt a fourth XXXX. that to The "new have adjustments veterinary they engaging uniquely telemedicine. than the to a is in this million parents more country, adjustment telehealth being our pandemic with largest support order tackle normal". in as important most We X.X platform medicine virtual employer to made pets during of in

service Our pet telehealth May will week on XX loyal our parents. to all of launch next

available be veterinary X:XX This basis, care. pet more pet is prevailing a PetIQ from to questions day health a client-patient the available line on p.m. with first and virtual Our regulations the interactions. comprehensive X:XX that a.m. parents to that towards dictate general pet assist about telemedicine platform will on every will state-by-state depending be veterinary these their step

respect with to our Finally, clinics.

with Our starts phased process tomorrow, XX the locations. center approach start wellness X, to of VetIQ the reopening May reopening

We service steps extra responsible to will and promote be incorporating every distancing hygiene after personal before procedures. curbside enhanced and Clinic and safety clinics patient. PPE staff and our requirements, will protocols incorporate clean disinfect social to

As openings implement the expand we wellness approach. measures, enhanced environment adapt our to and safety and current we our phased to safe, clinics smart centers operations to in the and a more community will look

weeks We delivering exists look absolutely care, today. pet parents forward pet and business the affordable in across country we and and ahead know the to need months a convenient resuming the

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

John Newland

to thank during this you, To team I Cord and their efforts for and time. Thank like would tremendous unprecedented Susan. Susan's start, our echo remarks

result the and PetIQ dedication, a marketplace. remains in positioned hard work of As their well

our performing the of ahead quarter mid-March business to in COVID-XX. in as Our of expectations first was months the a two result until of line

each wellness results and March. by pet are in Our generated supported stalled for operations products. momentum our essential around Product increasing consumer our as quarter, sales concern demand during temporarily and with segment we The and suspend January forced heightened consecutive to experiencing our in for were month, strong February QX, segment Service health we

and our record Importantly, our Product the became uncertain apparent, we quarter business sales demonstrated increasingly today. growth in environment our especially first an that and by provides adjusted EBITDA, financial face segment broader like strength

us The in of completed the maintain provide three a financial long-term and strategic view the position. acquisitions highly we strategic three flexibility and years last our have to have been complementary

allocations of the XX.X% versus EBITDA than million. quarter sales in Product increase pleased was prior As $XXX.X segment before $XX.X to sales of $XXX.X record last in XX.X% QX, the level, year. an At a adjusted XX.X% result, points compared year-over-year. expanded increase a better year. net EBITDA basis to to segment were quarter million, consolidated a from million, million, XX.X% which corporate the a Segment-adjusted I'm were for XX net our report increase also increasing margin perspective first to $XX.X our expected an

more e-commerce The uptick in was March sales in our product growth focused during channel.

late a strong primary While gross growth able leverage this quarter channel which is EBITDA. margin, sale we were impacted in once to segment G&A, shift Product our driver segment-adjusted again of the for the fixed

to Additionally, to our such our goal $XX.X brands our manufacturing our the in having segment, Services our revenues due perform sales Within we're into for growth the continues to network. million. integrating customer quarter first business as decreased of to XX% PetArmor success X.X% net

average year. million million. million, from of EBITDA the generated to Excluding segment the adjusted organization adjusted our pet was We quarter center that all $X on service in of margin Service growth a to wellness contributions our first $X.X contraction Prior the to of basis gross approximately EBITDA of across estimate million quarter double-digit excess revenues sales in XX.X% and in X,XXX last counts segment impact Services million was first decrease segment $X.X the operations, decreased closure $X.X million due net was compared $X ticket points of $XX.X of initiative, experiencing segment the clinics. revenue, the to suspending impact. Services adjusted and

an The available host mostly component. variable partners, a that but percentage capturing XX% is savings aren't the structure to The by opportunity of rent has form in us, we is variable the of typically this design. fixed are XX% costs organization Today, labor full which is service revenue. with and to cost

for highly motivated operations. place And in are happen, service our work. We staff to ready to restart we that to need and

wages of to this the their manage X/X disruption. So we through made we decision those continue with supporting while employees

We as the are strategic thinking about in this business. a investment

entire incremental expense, taking current context wages. of for variable to consider not expense the Accounting of XX%. advantage XX% we versus variable to are versus fixed are we the the XX% you within saving approximately this our When these our the decision due pay environment, of expense the spend, full

is, year was impact any in does of for our did previously from fluidity for include are on question the this our the we environment current our unknown business. the this point, announced XXXX, So and what decision COVID-XX. outlook? of which Service recovery guidance mean the not At based XXXX the withdrawing full speed This

would provide our additional detail we on However, to results. like April

continued to sales to further quarter. start net the acceleration segment Product Our second in March has accelerate

shift with the strong we pleased are Products the the the seeing inventories, happening industry. consumption within are channel our in which momentum speaks and We is business, channel patterns are supporting that to

that will Our of pending that close. This extremely high-margin business, to will be $XX continues in approximately closing on third quarter. add our product I'd at early basis million anticipated we certain services organization remind end the you accretive and estimate acquisition wellness to post annualized begin and EBITDA will this it an markets contribution clinics week. with in centers to the acquisition progress also of an Capstar reopen

This feature seasonal XX, million, which for As increased $XXX.X term capital our year From we accordion our total March the $XX.X availability million liquidity. is seasonal the inventory in The million, accounts total December of period available and I'd credit of $XX.X the reflects a line the million largely that in of million and XXXX. perspective, for debt, of to balance $XX.X of million of an have our loan, of additional peak $XX.X million busiest our of $XX.X us. compared cash on comprised $XX company increased long-term working is credit. XXXX. million and facility an and was what via of note credit to which receivable inventory $XX.X liquidity it as revolving agreement approximately of a pertains has liquidity, revolving includes sheet XX,

weeks In quarter approximately to fact, product first which five ending speaks this supply, of sales inventory of the represents velocity time of year.

March sales happens that side, receivables the seasonal and reflects a the peak in our in second flows quarter. in On higher balance

I'd capital within pandemic. observations our also requirements scope that as cash key the you the and working helpful may share consider of couple capital of be flows, a

strategy staff of to awaiting paid continue we Product our that the to profit our is This reopening. the expect suspension balanced temporary carrying center organization, costs wellness with than wages contributions the significant segment to are including due and any offsets First, service being associated build-out our consumer-facing more capabilities. near-term manufacturing improve with from diversified that to more

this from Second, a working perspective, the the of season. peak capital is

excess little evidence fulfilling inventory seeing turning and of rapidly, inventory. We exit are reorder channel sufficiently

should quarter with represent the the in to high coming of working First cash in the business watermark terms quarters. returning capital,

our inflows products reduction believe ahead. contributing we cash temporary you When believe in the we PetIQ well services fit to capital quarter environment working bring position best current are which and pet and the emerge parents very growing stronger products pet and are that convenient and cash with cash, puts positioned results build first closing, to and and taken flow business wellness together, even and with the lives. In in capabilities drive a XXXX a a affordable quarters broader CapEx, in that we pleased to their accelerating of formats free have navigate

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

Operator

Bill Chappell [Operator ahead. Instructions] The Please question of comes go SunTrust. first from

Bill Chappell

and good as afternoon Thanks, well.

Cord Christensen

Bill. Thanks,

Bill Chappell

first question side. services on guess, the I Just

Is has XQ? I past out? kind talked growth over had centers pushed you Is update of And new of the postponed? any on vein, that new far XQ? these some XX getting especially same on is doors headcount this fall? there, older added services in more coming from kind Or can this that that on of done more that wellness the color that year? a How you've stores the about little You the in guess, hit, back of locations revenue. you double-digit the Walmart before and give

Cord Christensen

and Susan that that Susan. I'll Thanks question. ahead, take question, the Bill. for Go answer let

Susan Sholtis

Yes, be to. Thank happy I'd you.

it in new actually too. well, only it first that So regards to the that to we our was growth in the regards conversion your opened, as seeing, VetIQs had clinics in were not but Bill, question, also is in we

grand really recall, XXXX. alerted if spurred we the the think February, orchestrated you come of area in and that substantial opening to in activities I owners really Those quarter to opened clinics. we all in early fourth our of pet around activities clinics

was seeing but clinics growth double-digit also standard our the was our standard in in greenfield in it was more we our that were it not as well, too. not So of only conversions, but greenfield,

activities for incredibly working were those well. So us

to regards have those there, In basically that to states. XX We're continue Those units sitting the we going in XX are are out those to closed. keep available.

We of grand opening It process. strategy that we part a open together. have different is put those reopening five that in as phases, literally and we have will X-phase

Bill Chappell

them it. that open to up? do just distancing? social with services I side, your you on I it how you work for the do Got before all And pent-up And go of a as product demand mean, expect

Susan Sholtis

a It's service know because The question. is and closed. that so there all, customer not Yes. great lines our we since we truly stopped first pent-up have of demand,

when are asking pet calling going to our owners, customers, we're clearly So us, reopen.

So I do is believe that demand. pent-up there

Second partners well. as our of retail those also calls receiving all, phone are

people So come us are to back. for looking

while see at owners, veterinary COVID-XX in seeing back with think I pet situation, happened to come and them clinics, only that the were what's look they they situations. emergency continue many

an are pet to owners who because to come booster help vaccines coming to due vaccines those their wellness, out annual get in to and is services and in so looking get they're to truly to we for reopen, there are start a And to on basis. to there need or their provide

So there demand. is think pent-up definitely that I

different with a of clinic. curbside looks probably initial written think service people openings, She Medical phase board we our as and imagine, protocols we're Dr. group Chief just on And literally XX, our brought VetIQs in the our in each a standing opening, can these of quarter. feels new first we remember, Curbside will is Officer, than brand of as having and be and implementing that practices. very has all, acts we of for first Olavessen, service. I you you she her

new we our number that have safe one, taken every but pet the we absolutely that through and keeping also protocols appropriate we're So that, to do, sure make step they as sure possibly to well, make parents too. have PPE can people then

Bill Chappell

Well, I'll Got over. turn it. it

Cord Christensen

so much. Thanks

Operator

David of from The Please next question comes Guggenheim. go ahead. Westenberg

David Westenberg

to labor Sir, start question. taking here. Hi, with for So thanks. the And I want

And picking economic and be there there then Some could is market, changes in Is this. changes now, an potentially labor generally, more is right a vet-tech the with impact we've been up some that points that possibility of data responsibility. heard? that the just policy you've

some are Some dynamics. changing of the veterinarians independent seeing

So the policy you about just think wondering labor. and way might

Susan Sholtis

Yes. question. Cord, I'm happy to take that

Cord Christensen

ahead, Go Yes. Susan.

Susan Sholtis

I think that yes.

not you as of has advancement one David, of can better is in the the only of benefit, been set is advancement it they technicians to benefits, the bring think, it of say medicine. if the the also telemedicine, I but that know, has that Now advancement veterinary you going practices. skill COVID-XX veterinary and been the And be to veterinary of utilization

happen. because So truly that a a we state-by-state the they a basis as those on that we Olavessen on to keep are decisions are these continues made on basis, level. at of capitalize daily continue happening that of But all Dr. those changes can track ensure of to monitor lot state to

David Westenberg

I that might And with in the of dynamics. but flooding one, in mean, then couple a what talked XTsand about would come to May. all consistent Number a the product appointments in an it. all want think And have if talk There's the continuation sudden kind to side missed seen they about due I the on Got April fall guess I experienced you've happen going seen X-XXX-PetMeds business? what of same the question, be is see Northeast. then vein, then that and pent-up there This in of early just Is warmer in planned of here. different they weather don't in the to you're I in kind demand pent-up a demand. of you

happen you might year? talk the half an demand. pent-up what the can actually of extended about in see Because So maybe you back

in just effect. So this and is the even up necessitates haven't you necessarily clinics there opening maybe where it fall winter because did this pent-up demand

Cord Christensen

We So us early first XTs going take seeing frame winter kicking such a planned and Dave, and big the in part. light time saw definitely the benefits of such in was January, off the of the first February a part I'll years a it been effect, kick season strong had It's and of us additional into early doses give since we've was quarter. see the momentum those off. this the seeing and to to starting sales those fun consumption

both The think, took on our March, to planned place otherwise acceleration where health prescriptions with get or of rate weren't way for and that their it work pets they faster some veterinarian from phone getting with the getting then a shift the that and channel in channel filled those. and good care or where their using we XTs channel was very to they early people at the to our as to get of could pet do through a coupled their over-the-counter access for through the vet, home safety alternative going a became

accelerate we So it that going quarter. to into seen second benefit. saw the continue We've

the second answer, to she'll be I'll talk that. I positioned think question, of part Susan let to more and your

Susan Sholtis

the fall, demand. probably of -- an how I we this go going parents believe for a centered centered David. believe have pent-up about Yes, trickle dictates and The much opening expect further for our necessarily it's do with and safety, have trickling don't around than centered into that, process, I we is clinics. I to start I'm that, period extended that to demand pet pent-up that, believe training, that demand But around would happy around plan do traditionally it's it's because that that that, to, we is also is time. going around very We centered dealt too.

out understand that gauge because of we do demand most is starting will roll the making tomorrow how to really pet that clinics. One how that have and to that to flowing sure help we parent we also is dictate important the things that

I that necessarily that of say to I basically wouldn't So believe dictate have fall, consumer that the going up think the that. a everything we clinics we're to is that but in going opening chunk

David Westenberg

much. very you Thank

Operator

go James. question next of The Raymond Altobello comes ahead. Please Joe from

Joe Altobello

good Thanks. afternoon. Hey guys,

So heard first question, I'm it not sure right. I

that mentioned number You Perrigo much And business this year. tracking sure you sales if revenue in quarter. acquired the business product XX% the not in Perrigo acquisition that to terms is contributed to to growth of related a that, guys the I'm gave how

Cord Christensen

think Good Joe. I you, question. hear from great to

they caused was that, the business to out and new think part is part, total that of XX% which growth what XX% own better to rate is the on so from difficult where of absolutely that blur to consolidate reporting that base we've our some incremental and brands is of exact addition some of the integrated the marketing cannibalize strategic only what say with performance to it's a And was quickly the I doing was decisions the numbers to by company the acquisition the organization. difficult integration The the those to in brands, total we're for dollars business. and tracking invested. through that performance performance, to is, business the purposely than the number there separating business made

the to business, we're confidence tell with can that So out Perrigo you just see separating are individual not increase. we on we but the track XX%

with One a of out product of the month happened in of plant of that shipments XXXX. April the the would of We headlines had month I that you share month in is of highest April. since

similar have the in we're month, May. years, track after many of to so And had and month it's a shipment a record we've on month that

the performing. acquisition, So very with exciting times it's how Perrigo

Joe Altobello

the that particular, up are the balance curious receivable. that in a like John that is little That's to was are helpful, of much sheet, it e-commerce. bit, to seasonally, this Cord. shift and quick And surge in toward tick was doubled much time looks due of And to the channel year-over-year. it due quarter, for late then accounts going guys I how the I'm the on maybe how secondly, that, you seeing fact the a guess when receivables but question

John Newland

that slow. then almost the grows, of for starts you that's of month as our the they cadence months would quarter, and Joe, is out the virtually it a first tell pretty of and March. Yes. of XX% in in sales great occur the February, it And question. the in sales, occurred the I quarter January

of of on grows a So and customer the your or regardless else based anything as compounding effect more of receivables the and of of balance the days outstanding, a concentrations sales that growth has whatever. cadence receivables it overall than result off

Joe Altobello

Okay.

by it channel at all? shift driven So was

John Newland

No.

Joe Altobello

guys. you thank right, All

Operator

ahead. The next Please Jon question comes from William go Andersen Blair. of

Jon Andersen

afternoon, everybody. Good

Cord Christensen

John. Good afternoon,

Jon Andersen

was stores services reopening, a state-by-state by or trying Was first batch that centers was more little to be On Or reopening it of that that how approach? by driven understand to was or that driven regulation? kind reopened, Just a are internal some better. the how determined? going the of

Cord Christensen

you want do go to take that? and Susan,

Susan Sholtis

be Jon, the chose factors are to Yes. that. There I'd first happy we XX to we reopen. four when address that considered

being first guidelines have but you talk local The veterinary safety, to you look state, to association first. at about at safety, state I the when medical look the have and

host making the ready forward box talk of about to we those Because, three were too. two facilities. well, number to obviously, part needed partner us on that two. move our number before all that host as PPE, etcetera, additional we those partners our receive had into make social to prepared factors sure when also retail sure we distancing, So to is is check we Part back

to to conducive was of parking order lot or was service, the item sure just have to The the was pet. out go able location that second in space part assessment. parking to space providing also lot touchless whether be retrieve making we The not our process

in into a and place? optimize measures processes And too? we grasp they going can a training take optimize of because we the new team, then tons to pet and as do notify the Are be of geographically parents Is for makes can consolidated then meaning have parents these team? them finally, well, can to able to place while? So with been able in right be we way our very put the our pet they that to sense it Training, we way. process tell and new that

Jon Andersen

X? this be the retailers? will that is is Does just one reopening helpful. it going Or that initial affect or really assume That's to we multiple should host

Susan Sholtis

them doors, be all the place protocols. with have XX which, in is partnership start with a separate safety they're those us makes to those facilities, we're sure they're across those to currently that it that Walmart So the about are what have they two that Meijer. that Think XX tomorrow, retailers. they And out again, separate with have that we great the and segmented off doors. they VetIQs are initial will easy for the and we implementing and really make have rolling They states, clinics appropriate make

Jon Andersen

Makes sense.

the little bit. in with you for touched It's a quarter, probably opening You you've did a on that fourth the strategy openings you executed the this Susan. quarter. The had grand fourth in

process to you open of of you here, to you are kind traffic? locations the awareness reopen look for to As and again have drive run do all the business that across that build pet

Susan Sholtis

and ready mind had the down, year. maybe that grand events getting grand openings gotten opening at that Jon, regards we close already to I we those would were of were that for half do to we going you, through the had when we to point of say the in

And with grand had so those again, grand performance with the the where we opening ones that events. tremendous

have clinics So grand we we've follow to definitely re-grand through we go to but will those the continue not. I us openings for expect don't to do back with did for conducted, that that and on openings those already

Jon Andersen

said position. quarter, it on the the that then close business, just Great. you you the to about side Capstar should be standpoint early might good you're acquisition, the be than thinking think, standpoint about different third past? sounds a or funding there a execution of funding either an And so in about there you've from Is talked we like that the thinking anything in product I in is, expect liquidity

Cord Christensen

credit that, very position Thanks financing and continue that's to it. are time perform the involved like and either type Capstar feel to excited had about it a with to accomplish over than always been means Jon. projecting to expectations facility various year this pathway the be John what to Yes. is to better in would goal. have performing use We're forward we from we event and that confident a and Board existing for of deliver good said question, brand we We've or we able our finance our which a members it. will acquisition, and against be myself during

now got on feel one sources of through these the will handle that good be a right So processed we it for deal like we've it getting using that we're very a company. accretive

stay will third can to able we the to still look And do to think requirements final we we track, close quarter. which on be clearing in early that FCC so we forward

Jon Andersen

And you there is that this. some I your the assets talked Is some And Great. cost product that Is opportunity opportunity you've in can't around an of to future? that if an manufacturing that. the recall thus expectation? there's synergies there to use about have produce

Cord Christensen

with for there's if those. synergies. to any do we've won't done the be we as good the their can it the to produce capabilities a think but negative some at as or the have of or Perrigo I have service for least always have up to We able advantage acquisition announce do impact, But would it able at we are to motivated cost take ready to we're any confidence to it themselves the don't obviously of we produce we and if didn't years. Elanco three bid yet manufacturing be it what agreement to they have determined to as never product sooner, equally And affordable. not manufacturing going said, it point. believe so on to synergies even at same for do them we there We get available, be

brand recall, it highest most portfolio you that brand over. when profitable, the margin be in will comes As our

have to grow plan just company. and we're continue the be right to contribute to the it time. able foster introduced to so be our at see in more definitely excited to it, it to it And But have it'll

Jon Andersen

One helpful. me. one for really That's last

part like owned to you've brand you of of that particularly that to opportunity I extremely talk Products brand with strong. the retailers, How the think, owned the online. in had It the business, of I with that just step congratulations, some is overall, so. that? up sounds conversations, the part respect going, So important Could business? been it remains about has think you've talked about

Cord Christensen

of I'm That's mix a and looking of doing distributed just a great Perrigo of at QX this versus in looking the the owned was week increases still the mix XXXX, then of in at talking range about. and manufactured between the to finished what combined manufacturing business now. have it in and Jon. question, is And what report actually if And we've I XX% XX%, with the that sales we've review past seen that we would distributed surging is happy dramatic been

profit these continue seen our you've the are those that we the mix, with to which up category as generating products seeing that expanded and the you're for that's why They've So manufactured growth. maintained means keep increases, margin business. dollars, in

And seeing perform. expanding ultimately, solid, just brands so of And our items, the incremental doing we retail analysis getting we're them the are getting taking better, we're we're we're we're serve, relationships that GAAP companies the our and by placement placement. care right the for

because people though to we're think good we're such in most place, it would very balance. distributed the that It's seeing increases, significant product. be would similar So a continue seen giving not only excited even we've stay of about mix a and

Jon Andersen

so luck Excellent, thanks much and going forward. good

Operator

question from comes Kevin Jefferies. of Grundy go Please ahead. next The

Kevin Grundy

afternoon well. on shift Cord the channel for that your everyone, good and I hope you Hey, Question doing families are online.

as But your before, on percentage unique consequence has could business potential what Products and been on us recession. updated the get give thoughts your Cord, now talk Maybe business. here broad-based trends your vendors benefits from terms with of liquidity. big wanted this nature obviously, is have even to like a of of online, about So if margin a here for I here to of a general payment huge I with this update there's difference of at an you terms implications perspective. you're don't in Or I to a dealing And know here all online. as some question well respect the to follow-up then Joe's

Cord Christensen

the XX% above was XX% I perspective. Product we Kevin. mean, for Thanks, slightly online growth from appreciate the business Okay. a than have the question. volume the definitely been the online. that, was and quarter, increasing about benefiting overall that Yes, obviously, growth better at from I

So we slightly growth saw other great percentage but brick-and-mortar did our still and there. larger see a across customers,

XX% ago. versus that up of are company overall mix where about was seeing We year from of rest it our is also the online a

with the contribution. line So additional in

perspective. our distributed of And being from they to, like able leverage buy help making to that we're we As as online, definitely margin need we'd not focus want we attentive to sales mix where fast a as In And friction will also, and be caught the our to mixing up G&A. product. we're said, consumers very creating ability to we've got that haven't it. with sure a at with we're to our product progress, product, these have we just making buy manufactured lot the our quite but incremental not

same percentage. the So the XX% us EBITDA the And and margin. earnings at that a the sometimes not happen accretive over time mix accretive are talked albeit get the to all sales it's to business, about to why to we've

we're our that with there in happy progress getting a to our the mix with margins of better be in the right happy So keeping very place. very the way We're and in contribution. growing channel

we increases we with their term of online with base. which they question, during second a contributing of to some is definitely seen larger all payment have a in One area time. in have Your customers. that And longer schedule, it in our a what our have is receivables this that vendor couple factor becoming particular consistent

that question. hope I answers So, your

Kevin Grundy

what you of the or, business helpful, if now Cord. What at Is percentage that can the can something of percentage I'm quarter Products comment. online excuse online? sure end that's me, your of is not share? your One, No, business you

Cord Christensen

Kevin. to that don't Yes. break specifically point, it out We

the that. let XXs low the know we've quarter this I a now up specific running up people then high in and right think we it's definitely But into that number. than don't better XXs, XX% give climbing we're

Kevin Grundy

A right. just quick for All Okay. on one John liquidity.

concerned Maybe were with sheet overly on me I like like It that So your you is, available then didn't line sounded the sound the about accordion you million you if disclosure that. financing. with use $XX cash the was balance have from feature, the with I'm in expectation. It between correct relatively including operations. think can wrong and cash

and corner, maybe the I know really obviously But how circumstances with guide between business is going the how want is that the between of think number puts puts the business flow cash unprecedented somewhere on you you $XX that? us, to takes then speak is And so about but million free with the free Services we flow levered well, in dealing as cash this and and generate, we I performing helpful. the to the takes, a the side. just should Products in this, that cash sort range, broadly, and would free don't that put much to try about to gave you like want think I don't think you're be

John Newland

Yes. Two flow second to going generation. questions. start the with free great cash one the I'm talk and about

So...

Operator

Excuse me, Mr.

little a to Newland, bit would to come closer be you able phone. maybe the

John Newland

better? Sure. How's that? Is that

Operator

you. Thank sir. Yes, sir. you, Thank

John Newland

Yes.

takes flow So we'll talk on cash the free about first. and the puts

But earlier. we flow associated are funding as but X/X of associate and additional puts what the if are losses of the and the business. the operations nature the our will good we original and same the So CapEx, expenses operating clinic our the we're at outflows day, that generation not base free for comes at than as not as, ready cash awaiting from we generation not the have. the what from communicated better, end But it's the our cash flow We're The funding rollout. we reopening. the pay operating And with versus spending just takes, doing? the of Product be that's savings cash

confident we're that. So very about

sales the is before quarter. second go of two receivables And grows the right have quarter. our first our of as about continue we discussion the this we as continue our selling throughout season. that year. yes, then, capital second the of exponentially that the the about and to remember, all gradual the end throughout end height highest second levels use That quarter. weeks decrease this This is our of Kevin, then remainder question, decrease inventory at into of will talked will And year. begin you every how first your cadence We of And this the

So with pleased are. We're absolutely position, I'm we where with and our right line liquidity with in comfortable expectations.

Operator

ahead. The comes Oppenheimer. from of go next question Brian Please Nagel

Brian Nagel

my taking Hi, for good questions. Thanks afternoon.

there a crisis think question, of way avenues on acceleration the accelerate that bit really was a benefit follow-up a meaning and to normal started that business much about, really the But of how is how product does at first side, as year, March. look a as into recognizing to past we early better result So take a the in that closed, there this continued that other other into QX? was retailers, the then here coming with so due PetIQ, that to hold mid-March, other to into quarter,

Cord Christensen

it. question. the for I thanks appreciate Brian,

we where about place. pretty we've ahead And number. getting going how growth closer slightly ahead January, February plan, think accurately of March is just be our coming only of be thought had to determining I and would what we take to much significantly definitely the been

that And even so and month into significant quarter-to-date. it noticeable very we've a difference seen the was of number really widen and April going get And bigger volume. in

second be message, for that we've in in ability seeing that of number. closing although business Product in said quarter, that that we've mix as overcome some think a from we our definitely, we're will to clinics QX, the larger we given So the the what impact place on much sales took the

if rates again, are most, the all, see happening. at above can vet incredibly that from And far up impact are down. that not We're the grateful closing the offset our And our the what of increases to service performance of that we're, is business channel percentage organization. from in Product that,

do a and believe convenient we of and how lot easy business stuff channel. see be and people there sustainable as stick our is will to and it So that affordable with

arm through to to company a in we're space. to it's of excited the so this And be this, going us as increase we take believe and another something that's going level kind of see this to in shot

Brian Nagel

All right.

the follow-ups online now this to prior business. because acceleration, you've that, will, similar As again, you to a seen in and is to but this if follow-up questions too,

If the consumer should as you online somewhat retailers deal extent renormalizes change your how see But economy out that waiting online hopefully you this in to does the relationships how changed operations? behavior your normalizes. has well, towards as our to that that shakes with happenings does physical sales, with we're but

Cord Christensen

Well, didn't get what I you asked.

question. head So I've got to around get my your

So stores? both how to it like, and does with have brick-and-mortar online people change, our

Brian Nagel

we is bigger omnichannel. what accounts the where a it's sure; It's Yes. saying have an I'm

assuming selling an of sales business, that So they operation. the change online them you're the does relationship? to what more also sold their have store online, more that so I'm then underlying within

Cord Christensen

No.

the side communications online our some the still seeing balancing, We of from brick-and-mortar. in I the saw the a one shift the our do relationship. of haven't channel brick-and-mortar where really had our omnichannel that and and versus that great the seen their have one change It's best online underlying mean, space. we they of sides joint best of having channels companies also people quarters two the into reasons even retail we've their of veterinarian in ever the with business. participation brick-and-mortar both any strategies that large run business we've referenced independent really been from And business, great have having we're

And change haven't seen in all so that we any at environment, Brian.

than channel been the then And how this in with we've never the fully rates this perform interruptions this support staffed and do companies a as is fill had other the run our plants that years we environment. for good held ability conversations thing our have at amazed with the happening. we and battle-tested to industry. no in health keep think had that through happened to I've do heads just more that's literally environment of had shift I and XX% And we've be that we've every company we animal what at better entire

interruption been either. So there's no for their businesses

if are just this the and anything, all greater increased, value to market performance involved and generating our the value for even has people we gotten that has think environment. through I So the our in industry

Brian Nagel

it. appreciate Thank very I Okay. much. you

Cord Christensen

Thanks guys.

Operator

Christensen for any over like conference would the I session. turn question-and-answer remarks. Cord back our closing concludes to to This

Cord Christensen

to people excited priority everybody access. by we've as many first our and And couldn't our pet partners, And being and joining times, excited thank doing running our obviously, service service our extremely needs. more clinics our healthy second opening parents to have parents. and pet we in being delivered business quarter. to obviously our be to so We're serve weeks and we our keeping seeing us and far We're want help is start the stated we're sure able back in employees, with make and what to to an quarter pets over up essential forward and clinics first and all for I getting today. able their our their of the excited results job safe look as months the

of you're our lives. healthy of situation hope all interacting of you to your forward joining your through own soon for look safe of your Thank all all and I you keep you pandemic guys. all and with families affects very you, associates and this that us through managing today,

Operator

The has concluded. you attending now presentation. conference today's Thank for

You may disconnect. now

PetIQ (PETQ) 10 May 202020 Q1 Earnings call transcript