PETQ - Earnings call transcript Q1 2021

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Operator

Welcome to the PetIQ, Inc., First Quarter 2021 Earnings conference call.

During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Katie Turner, Investor Relations. ahead. go Please

Katie Turner

and you also XXXX Thank Cord us PetIQ's the Sholtis, on Chairman Michael Financial Good EVP available Smith, conference for for call. quarter of President, Susan Officer, earnings Chief Segment are Newland, On first Chief and Officer, will afternoon. Product Executive joining John be today's Christensen, call Q&A.

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

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

website And Cord over In reference. addition, I'd presentation turn to call Christensen. a for now to like the on its posted supplemental PetIQ's

Cord Christensen

Susan I financial discuss results. first you, afternoon, joining quarter us our Katie, our to you Today, on everyone. results. business will detail an John and and our provide overview segment, good appreciate of begin highlights. today greater our strategic Thank will Then and discuss services will with financial We financial

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

XXXX. our very growth our are pleased start with and results to by strong services generated product in driven record We both We segments.

and has it team we and approximately objectives, ensure are on margin to $XX.X sales done our wellness needs. basis and QX This and wellness well and points where momentum gross EBITDA to strength Our e-commerce demonstrates pet $XXX.X parents and XXX health Adjusted pet and across their net their adjusted execute pet serving fulfill million health to they our of our business. increased million. need expanded XX.X% pets increased serving to XX% when year-over-year. retail the partners strategic

of XXX our continued to Product quarter, both channels. EBITDA from first sales During of an robust XX.X%, basis an we and the velocity net $XXX segment EBITDA million, representing to last distributed across and to compared adjusted adjusted experience product QX manufactured tech million, products increase $XX.X segment margin year. XX% approximately increased XX.X% to growth sales points all increased

reached business a from services abate. to inflection saw we point pandemic the Our headwinds starting very important where

an Services the adjusted have QX of of on been EBITDA Service period segment COVID-XX $XX.X the XX.X% not revenue revenues discussed QX, revenue from was first and increased to For and segment for were contributed segment QX. and QX, last from million if our compared services and million QX. to estimate earnings of $X.X last net call approximately $X.X that Adjusted we EBITDA up net million impacts. $XX.X absenteeism the increase of the as our $X.X would last $X.X did XX.X% Through net quarter. XX.X% related was Services for compared still year X% quarter total an segment rate elevated, of have million of additional the same the segment million services have half increased And adjusted We million of year, of EBITDA. would the

progress experience first impacts. the quarter, COVID-XX However, as we through a we improvement welcomed to started in related

As and thank continue lines helping I be they all on our week-to-week our a to XX% want quarter the the employees parents their health for the with work to top XX% illnesses our in remains pet result, QX. compared safety to and pets. members ended on and priority, single-digit on we related dedication of The COVID-XX closures temporary team based to hard and front as their

our looking closer categories to pet pet pets have Products save are care at access pet health that tailwinds, robust wellness of the for year. look Capstar we industry services our and in smarter as and as were lives significant are improvements XX%, better manufactured Capstar including money e-commerce and with our pets’ our believe These was QX. to that segment for the by resonating was and over for doing humanization increasingly were their affordable pet portfolio enrich excluding consistent delivering XXX%, versus products What pets business quarter. quarter, We driven up taking of options convenience We remains gains mission veterinarian the it. parents XX% service business up continued ways up sales through continued our our and last is to are pleased QX for their first organization business parents experienced led growth PetIQ's Taking parents. or a for the help QX by into of including in

emphasis e-commerce payoff. to brick-and-mortar team's continues and on Our retail in both winning

quarter. specialty the in our XX% product traditional driven timing quarter. manufactured distributed was the first partners, quarter As retail channel, of which for also XX% standpoint, based consisted our XX% the retail the largely shipments our up by to in on largest of and a strength of in the From mix saw we one pet business partners

slightly mix our mix. was sales distributed year higher full anticipated than Our

year for health and of We and expect several sales. to the PetIQ the full XX% pet wellness. as flea of and approximately in such categories participates largest, fastest-growing industry, our solutions manufactured tick within mix the to increase

have channel, we categories our compete size we to categories As better purchasing are evolved these in. the market data understanding both and of reflect in sales

As report I've a e-commerce and data our noted from known broader comes a of from XXXX previously, Nielsen IRI partner data as Data.

retail For $X.X the sets a weeks XXXX, show were e-commerce basis tick XX, these market growing flea compete channels brands channel, outpaced three and share first category year-over-year. grew March in tick to share where across by category data manufactured by XX%, points the we XX pacing months ended portfolio driven XX% in. XX% while the is, and of PetIQ's our eclipse and flea up XXXX. the These XX gains picking brand billion growing the the of

fast-growing of lead growing grew within PetIQ set grew and the category XX% the fueled this was form continues in and by performance continues tick with brand, of was treatments. with fastest-growing which XX%. Capstar up to XX% season this QX XX%, customers the outperformed Our be Plus, PetIQ's which once PetArmor brands oral along flea segment portfolio QX, for and head In maintained was a the driver as our expectations. full portfolio that is quarter the broader year. to delivered our again peak growth the momentum to our we having our category. selling for expected results and into for This second be in Capstar also

brand it measured the the the grew XX% For XX and of and year, making tick Top markets, across is fastest-growing the in offering flea Capstar in the quarter category. OTC four consumption the all now in the the brands number industry first within brand

achieve will segment investments QX our make margin strengthen to to to from brand. conservatively This based in we continue upon Capstar we of and line greater drive EBITDA as $XX clear million Even improvement of Capstar the products stated than XXXX. have the on incremental XXXX our goal full projections a further year our results of sight contribution brand,

based XXXX, build weeks We the strong to opportunity just a we our in e-commerce the within beginning Data this XX%, the XX% the ended plus products to growing wellness and a the brands eclipse move PetIQ health view yet also trailed we same incremental grew to now segment, for nicely Nielsen portfolio XXXX For as billion category on is XXXX. at out pet set, forward. XX%. XX category pace as OTC due where grew the $X.X on the market March segment category and are XX,

in As line what health half wellness. discussed position us advanced e-commerce the in the e-commerce and XXXX pet last led dominant has across better to offerings an and the quarter's within are communications, product back plan direct-to-consumer for to of to supplements. we within premium compete launch the market These types become channels of to

entered perspective, availability stated cash flexibility needs From our of mid-April everyone want are in our cash to have We guidance existing to loyal our this to liquidity a on and participating in We understand begin business. potential we under do due financial meet credit ample option consumers and to continue and related our generation to we previously. segment pets. their formal the support facility future as suspended the from cash sheet into uncertainty provide although growth. balance to COVID-XX to And we hand, have impacts new that, I've to an and even better with excited

results. continue impacts significant COVID-XX Services maintain plan in sales million net budget variable in only EBITDA, this to over $XXX with to related million our We and internal the an $XXX segment approximately adjusted of being affecting

of generate the approximately in As adjusted XX% second of adjusted PetIQ. adjusted of look our great we will year We lap begin adjusted us prior, balance we margin half into EBITDA total, year fuel XX% and and full sales year half accelerating our our of the our Similar be mind EBITDA demonstrating to another sales to of EBITDA the total our to XXXX Capstar will to we years and margin visibility first to products XXXX. QX and quarter. sales expect to in of The year. profit continue in be maintain net segment of the August net largest expect at and the expansion expansion, approximately of leverage Keep it net addition help in weighed significant of EBITDA.

our generate the industry optimistic PetIQ's further provide off start as in segment we continue with and of are that the Services We COVID-XX expect our animal to a other impacts, absenteeism or In in long-term guidance. will formal be health year summary, and lower annual to we position are better will then rates growth. fuel progresses, in we believe position improvements minimal related to in a XXXX. to We differentiated strong

I great disproportionate increases capture to amounts and well tailwinds benefit to to positioned adoption, overview, all believe pet dollar integrated expect forward convenience now from pet vertically per that industry and and manufacturing continue the on call would healthcare; affordable and footprint spend remains for to veterinarian industry turn PetIQ to a national with We Susan. of distribution like of product growth emphasis rising pet over the we platform convenient in our services. We accessible as move us. a an With

Susan Sholtis

quarter up you, the Thank continued of we of impact first the COVID-XX services year, to the business. shake on Cord. our In

rollercoaster New services January. consumer-facing parents. thank for and for deliver, improvement QX. safely affordable incredible remotely providing the early services mobility if many for to once As pet peaked the didn't pre-pandemic energy I and levels, welcomed was And the remiss and helped rates parents. of businesses. COVID and in U.S. in and pet again, effectively operating and QX Year still our energy to team drive and fulfill of the working in our while, the though clinics us U.S. mid-December energy were open to all was country metrics sequential convenient death COVID uncertainty XX% in consumer hope, below XX% I and our in QX. of be peaked veterinary would the remained Even our That with our mission was serving performance of drive team a their workforce January infections

in As been our services of our generating all for impacts seasonality. our veterinary to I'm typically we've on we have report key the growth QX. that emerge to quarter similar Keep fourth in prior focused proud we quarter. represent and on in from results consistent business, service COVID compared improvement based to financial results related historically, our quarter double-digit continued KPI's mind, in first

up pet volume versus over total was our our Importantly, were QX up XX% XX%. clinic per and over dollars

for of as versus number operated we the XX% grew. demand quarter services the to veterinary climb, over in Finally, clinics QX up wellness continued

our as Importantly, in experienced result headwinds we to point results we abate. COVID-XX an saw a the as inflection of key started

is our slowing held stabilized poised dramatic This for a as the services a experienced has clinics sign which percentage the has and business first we just into Specifically, of total dropped single-digits the is time great absenteeism, for continued pandemic of another since began. growth.

great overall we nationwide, Our industry see continues the in incredibly clinics more is ever most In to over a that service the tailwinds. to busy. of find QX and than pleased also their nearest veterinary This outpace QX, are parents veterinary alone total, with growth the pet market, are clinic strong versus to virtually QX volumes pet our also in team of connected before. XXX%, skyrocketed callers by Call with location. wanting indication

Telehealth our continue most to of XX new parents January home. their QX, with in grew off pet centers to as and XX% pet We addition, asking QX. wellness opening versus they center manage pets' the kicked In discuss needs their health wellness and in of from celebrated build-out calls by our XXXX symptoms our

wellness centers. for in XXXX to to range We XXX be new to of continue expect center XXX total a wellness our build-out

first collaboration the of of our operate, plans previously, representing March. centers mobile and in parent be year that we to locations. conversions during level wellness new unit new We kicked centers XX% tackled our In of to time spent spends the with retail as half wellness We respective pet for the of year, XX% expect optimize our reach. the our be I've we and, developing and which combined between a mentioned evenly half plans to the geomarketing weighted pandemic marketing off new second our local with our at the clinics growth leveraging collaborative and also very in considerable marketing partners Greenfield

that there continue about particularly we are mentioned excited and closely. As last monitor initiatives to quarter, two are

focused is parents pet these new on initiative during attracting times. first complex Our

PetIQ In affordability a Pet of clearly reasons; utilized new excited are experienced parents our QX. to initiative XX% that report two are parents of new QX, services the similar parents again were pet that to working. We to PetIQ. and is services pet in we this using coming our convenience. rate also for Recall,

launched our on wellness plans, focused is SmartCare which initiative in second Our QX. we nationwide

X% We from care wellness to for of program SmartCare parents a this traction pet are this over with excited pet an parents positive monthly initial plan. way pet provide to see purchasing the low their our plans for annually fee. affordable

as are average. times our that generate you the more on Another SmartCare we updates year these look is plans wellness forward pets on margin revenue to key when our the program to with and the benefit providing We this progresses. X versus initiatives two

benefit services remain efficiencies. environment of back we top greater safety get The period. employees, business, retail to health we and as pre-pandemic pet more Finally, partners, to our our our and operating in our to parents expect from our pets their priority

U.S. will and population counties how an to suspended dramatically, our increase service As vaccinated pet XXXX removed this we many and example, count margins. as and by that AVMA. March pandemic. trims, service clinics An nail the our mobile pet will that states, also the was we we COVID-related and in improve eased, staff more deemed wellness it certain of we it can service, and total to restarting services reintroduce certain of essential the are in By the becomes and regulations did restrictions means temporarily similar centers prior this

example clinic Another is staffing.

these we solutions believe the have of who the the a sales to and about of year they will to veterinary that reduce appropriate increasing are cat profitability. of that the of to desire. owners pet while we efficiencies PetIQ lines height We place over in the family, industry providing right expect pet With in I'll an and at news staff mission open rates. veterinary we This part care the gain parent John. parents overall retail management. that call manage additional our distancing on in affordable right progresses. millions concerned to affordability remain During The time. that, that and is their the perspective, their with social and care we and PetIQ, pets COVID, to was partner staffing, the XX% know benefit cost our at of healthcare help closing, is focused From throughout to at increased assist our out pass for business crowds In pets flow routine opportunity affordable stores, parents the good are more pet are pet dog added with for of necessary, operational our brought as like consider year ensure a We for seeking great

John Newland

Thank you, Susan.

continued last are We record strong with by increase year. was $XXX.X driven generated net growth, product XX.X% million, Capstar. our pleased segment start to XXXX. increase to QX sales including PetIQ compared contribution from of an of This

The We of compared approximately from In lapped with an anticipated. prior in a consolidated quarter. of XX.X% to than closures flea million we $XX.X QX centers in our quarter XXXX. shift million, timing reflects sales a COVID-XX the order segment QX were by sales from product tick year. related million sales this the benefited the XX.X% QX, $XXX to and year also up were segment new year shift Even timing, contribution contributed in Services in the seasonal quarter. from increase $XX total, of wellness started this product greater that to we This prior as net of March sales second

of are COVID-XX significant Cord quarter. headwinds lowest mentioned, Importantly, pleased we've Services any from with would the the revenue the have related the and since impacts contributed of the improvements an experienced in million $X.X Services both COVID-XX segment we estimate were as the as results Susan the pandemic. segment the additional in very We onset without

the million same prior $XX.X profit $XX.X of improvement year. impacts XXX first was for XX of basis XXXX; adjusted to XX.X%, the temporary and compared million, related to estimated we point headwind points was profit as XXX even quarter XX.X% from gross increased period an points and when gross experienced increased the Adjusted basis basis segment. an to quarter margin COVID-XX in representing Services XX.X% First margin gross gross

to of of in First quarter $X.X million an period; R&D of $XX.X quarter; in-process assets. administrative the increase expenses The general $X $XX million. compared amortization write-off the non-cash $XX.X administrative the were prior and recognize increase of in million an were $XX.X million prior million year associated million. XXXX compared expenses year and did $XX.X to company million with general Adjusted expense one-time

SG&A As a adjusted flat sales, net of year. to prior percent remained

an with adjusted sales strong $XX.X million; profit growth of increase to achieve year. compared EBITDA combined Our increasing helped XX.X% of QX our gross last us

EBITDA timing the of million of I flea benefit that seasonal the the adjusted tick from shift includes mentioned. approximately Our in previously $X.X a and order

had We in segment R&D XXX a also impacts the timing QX EBITDA EBITDA to this XX.X%. margin existing expenses better segment EBITDA and would contributed adjusted the first $XX.X of adjusted last plan. have XX.X% quarter of million COVID-XX our the Services year. adjusted XXXX expanded EBITDA $XXX,XXX product shift our perspective, locations $X.X of the two $X.X the EBITDA items came a services year not million. $X.X million. of million points quarter. adjusted We After taking in if these in estimate have account, consolidated from additional increased related to to Adjusted did From into basis than second increased that segment other quarter all from an Services first to

March balance sheet cash our the liquidity, as XXXX, to and cash Turning equivalents of XX, had million. $XX.X and company of

million business. support success a AR liquidity provide the given approximately total convertible future on liquidity of million. million before credit $XXX.X $XXX million of loan in of XXXX. basis April credit point in rate facilities XX, March greater $XXX of its largely XXXX, XX, interest representing normal more April as the $XXX.X million finalization result increases balance, XXX Working XXXX, seasonality revolving of and of to the company's Our loan including inventory annual term $XX.X the terms, The as a with term in credit of working debt the long-term facility, as to XX, of and which and debt as increased was the growth, capital total facilities of our flexibility favorable of comprised in is decrease announced primarily new March capital

currently on not XXXX and Our in Susan puts segment, XXX down or position PetIQ significant related our improvement as build opportunistically potential our business. to consistent highlighted, in as cash available in as improvements in drive centers across providing plan well Services us Services an open contribution Product to QX and solid ahead segment, quarters the positive uncertainty in from our outlook due flow give to The annual the the guidance to to XXXX. debt. continue services liquidity, our segment from perspective, COVID-XX From we're pay impacts free the a wellness XXX confidence cash

to optimistic continue QX. services and in point, We our improvements business has an are see will reached inflection we

predictable, We formal expect a better annual will our be and guidance. to will more segment become results we provide Services then position in

the continue about Product to we acquisition, adjusted achievable. confident remain when for visibility we for XXXX. We solid the of extremely believe of our at potential very EBITDA start growth have Looking we segment, Capstar with another is and the margin to as sales year than pleased XXXX strong greater to we believe to our expansion. incremental $XX we're and from EBITDA closing, contribution compared In completed strong growth million Capstar

adjusted as and questions. a and entire we robust dynamic Operator? continue With to industry Michael sales the execute record in Cord, well are wellness I Susan, continues your available that operating from agility health tailwinds. Our and the of and are our environment overview, pet to team a testament that strength EBITDA for to benefit net

Operator

question David line first Guggenheim the comes proceed. from Thank Our you. [Operator Securities. with Instructions] Westenberg Please of

David Westenberg

really and here. thanks a the question quarter Hi taking strong for congrats on

So opening first start let's clinic with cadence.

the if or XX would XX around the same and And half commentary you roughly imply number the half would in is next you'd said the the amount XX the of fair second XX imply XXX or clinics? and that? the that wait [driving] the there's first indeed a look open same, case - I'll see at way I to really would one. that ask being million and you'd half - XX - half that would think that about in receive and that Is imply something same - same I XX QX? second Is which first

Susan Sholtis

Hey Thank you David, for it's question. the Susan.

on delivering first and second half absolutely in for with half opening the of clinics half our We track are the commitment in our of the towards half. the clinics target

correct. So way absolutely looking you're is the that at it

we've open our - quarter. I clinics the ability in that back last to XX XXXX, proven think in fourth

So well hitting we are on that track number. to

imagine, as you probably more before and we So managing material availability, stating can I do because nationwide this work obvious of we emphasize we those incredibly And this we're ever so clinics probably XXX% want quarter. building but though, than closely also the that the I that what add together. challenge our year. that committed to partners, that, of at availability collaborating very busy to labor level an I'm of to challenges have would are through with is our retail enhanced continue

have addresses. We

We have clinics committed, so they're done.

will got there, Now but partners, thinking get you're collaboration think but us with in building working get about our we've just it I to them, on to correctly.

David Westenberg

has traditionally, about marketing know no the ramp-up cetera. spend, that's I Okay, color. great there's PetIQ where et talked phase,

think you So them to it QX's. I was open and like used QX's around, to

there, got I seen, maybe although kind more. services historically springtime more one QX maybe with is I'll bit talk some Do the tend that being you seasonality wait departure. get business? of think you I can maybe do the think - you’ve - of X% little a activity? balanced than you to Can SmartCare, little maybe I of And services wellness in of about a think bit a

Susan Sholtis

different a think of couple things. Yes, I

think of and being First event. all, both to you a of wellness springtime I as tend

think I year this different. is

I think year different. last was

out. think I we're so see those services to going to And continue pushed wellness

to pet continuing are waive. I think the parents

veterinarians. time to get a also I into to think have they're their hard full-service continuing

in at all. quarter not build-out I'm So about concerned second the

to we is incredibly of going welcome provides quarter, And parents, products. beneficial to be out their to organization. them challenged and last I COVID, both As of of wellness especially it coming an offering that an that be those to be an as really are think for financially with plans our are continue going spoke pet our to part important strategy them

David Westenberg

of kind it, of that data backups Got - terms our great. conclusion. No, exact in same supports appointment

I Seresto with from makes to of even any last could customers happened is of Thank jump Today or any topicals that, see you following around gauge the and a that? guess collars of question Capstar? that you. So terms changes USA consumer my lot just changes oral maybe sense. going maybe that article? on in just if off-line to was see as after such And benefits I'll kind there have Did

Cord Christensen

I'll for David, take industry closest Michael question. data specifically. the I He's that think collars let the to watching

Michael. ahead, go So

Michael Smith

and not Yes, those activity brick-and-mortar and Today noise the around were for from a monitored a consumers the top especially the if weekly retailers. with feedback David, consumption the of and USA days, our consumption we both article data, minor initial there daily on partners read like then to e-commerce couple follow-up in CBS. And get some clear from basically

that So they very well. storm weathered

seen a Seresto segment of topicals collar within brand into haven't other the collars or shifting out to candidly, the from lot brands. We forms of

publications. things a to-date, kind So That's nonevent. they've play those of those I a a impact wouldn't seen not continuing always it's say development from out. as significant But

David Westenberg

much. so you Thank

Operator

question next Jefferies. with line Our of Steph Please from the go ahead. Wissink comes

Steph Wissink

health we afternoon the good Services when on move remind Susan, of of I'm I one how a segment. contribution you, a you mobile through the benefit as have center? for of function to everyone. question, you Thank can is the back economically wondering And you clinic step Just and prior follow-up I think us then revenue COVID? about the margins out volume. kind question is we us of come should that what backside in think from the to just if walk terms

Susan Sholtis

conversions. talking thank the by start Yes, the for about you question. just I'll

end, faster, something the ramp in more the for because say, already So faster the - clientele. ramp on concise for lack clinics, we've conversion to they built they of

delayer convert to to the we used We go impact know being once clientele. that there, sometimes count to they're it that we're we of when from our get that because a out into year that the our the on sense processes related we pet COVID certain then immediate business second count, center we start we tend that would again, a see our on a margin multiple expectations us improvement, we've increase times an to quarter In a and will to this frequency I So to a because week. makes once procedures. because we improvements outlet. get is cadence retail complete regards pet items our we are people to built that say And And Once we that there. we'll unit, mobile increase up up wellness take margin see that in what also month. week. a as then - And will complete

going that operate Of got faster. faster. now we delayering on are our And that's we're focus continue to course, teams where to in we've process regards keeping right But as helps pets to get us to to literally continue safe. to

usually the time. we but from that it's wasn't So speed that's in, us it keeping as - are delayer just the us we It implementing operate items - that down. the just slowing

- that safe. of going is to just time, the making because the up, both all prior just et vaccination was continue to it this, we rates people keep it But you sure Now, cetera. about

Steph Wissink

comments on initiative, more out product year. bridge that first help - one in points to can on expect for And wellness Is just I'm key or the you in of around of wondering the there Cord, the one you related connect Okay, side? of XX% and average if year something manufacturing half the just the XX% manufacturing? kind for you to us that out helpful. then in that the for and of wellness you that health that's business of is that you planned health notion supplements. your the quarter of a And second to teased the is range have

Cord Christensen

for question, Thanks Steph. the

great budgets quarter, Our we at there the our order flea category full tick ship vendors have with of to you're XX%, for be that. in the visibility to bit supply those. first had would it it that a quarter second launch, to, various outside have that, and incremental if for in and softer materials us you The for that. year little could a include was program the first we be to involved retail does size time ability XX%. that feel first was with a a not for significant the their fill and concerned the of that the quarter, of one And we programs Any that in new knew to chance large quarter, launch

so, before its we quarter our second an see be projection. or quarter even overall really item of success let to of first we incremental the a And new launching can part sometimes try

to it's to on gain be strongly, to So how without still our with we contributing, that full point or we we've items part and the and be about full we - our expansion that being of program, of based XX% manufactured and a part of are better, able track they're just share year on at feel the been earnings XXXX. talking expansion going see during and margin year all growing

Steph Wissink

Very helpful, thank everyone. you

Cord Christensen

Thanks, Steph.

Operator

Please go Blair. Andersen of Jon question Instructions] from William [Operator next the ahead. with Our line comes

Jon Andersen

I manage confident maybe starting can Hey questions, about business, seeing relative in talk going the highly of kind maybe $XXX you're what's good - availability like or everybody. on of clinics afternoon seeing get initial million Maybe the your it's kind availability materials $XXX I’m of you're that could things - more - there it's closely and if the of then on about year. plan, to also Susan, and having to new kind where talk services, a you're to up. to to thinking of Are a Couple trying to you’re set about? service what counts, pet more little you're really any of of things encouraging or kind staff the terms bit you trends little the recovery that million earlier, in bit you guess, clinics the maybe point resources for to upside the

a So what's what bit are you than of to working maybe and just or having of better closely?. little maybe thought manage kind watch

John Newland

of some let it. for in. Hey, Susan fill I'll Jon, I'll to question. hear Good the take voice. thanks your

where we variables the out foremost, key trending we first an in inflection see and and affected and started First us point to all our the most it the national basically the longer the of saw quarter at bottom that the us we're trough into no say, margins and thing that of that we trough, exciting saw XXs. was to the way coming actually okay, run in those were items could down to the improvements. now took to high manage our those each seeing XXs those see We improvements. able and one the mid of to low We're point through business

the to the that running, that that if we're - those from whether have we're results come the We're procedures it's we is So that with and it's of of can seeing seen, seeing labor, some the get business of back P&L. excited that about clinics pets the things limits we the are number quantity what involved could running all business. the

about right inflection to just excited lot to an now, run back we're have things dig point in of and it's where business. time So a the

put improvement to them to to saw an over even items, QX. on all weekly. and in next couple seeing across plan generators those So extremely the track has the feel in We normal back track improvement like together good costs KPI's get our watch We're better good we're quarters. team revenue variables, kind And of already QX.

do but before to have vet easier versus is that that like labor able So not we're I we're to at the really to - still think don't that it we a anything are a areas be continue out to to zero, get we're and what absenteeism, it's a veterinarian of about tight, managing very we job good single-digit That's to but COVID, improvement, of it pre-COVID. that's out until a there. down Challenges saw always we coming is We're pretty into although still back XX% huge seeing XX% number excited we where still it's were zero challenge, a was we're work, absenteeism, to be come also easier I you'd having going seeing and having we're is be just add? else it be pre-COVID, labor and closely. to would people watching But like know, goes Susan, the to going concern. there.

Susan Sholtis

you John. everything, No, covered I think

great I see see improve our margins QX. into And pets think where the is will increase that number ability improvements focus our that of we our and moving overall, really we is. to that

Jon Andersen

helpful, thanks. super That's

then secondly, internal what I on on it's your three you're thinking seen what incremental that this they you to are about like versus portion not? sales is that a that are regularly? I you versus of the How customer category, and you're of Just want continue you new for base new get of metrics or program, your times profitability the think, is can SmartCare, I'm for amazing X% when service to think much pretty haven't also that maybe you share higher? are you're mean, sense drive seeing, level the SmartCare you of SmartCare the for see mentioned help the franchise, that, the new customers sense how shift? for is targets you kind half happy Do of any a business. to have business PetIQ to on So that? how seeing, and see business, maybe trying couple the is vet very a kind be is And And there meaning to significantly that case with - to a of

Susan Sholtis

see at pets. because quantify parents what's are are coming regards start that makes them veterinary top aren't every to very full-service that are sense. to we've us - your can't clinics protocols. I'll curbside measuring able new those number you. in When of that of you We take because the which to to service their veterinary a the of day received been lot pets haven't a that look care, that presented it happening in XX% are the at not Thank

their time are are of and the care their serious recommending care more So come - that routine for there spending vaccinations us full-service taking that we actually their clients veterinarians cases. to because they're

pet referred to coming parents the great are It's which us, actually the being that us veterinary clinics across collaboration with great. to new is So are country. a

competitive cases. will as more I to on really at to be focus X%. look service well of X% marketplace, because their when because in you provide clinics year take we full-service to the X% the would work rate plans, the the continue ecstatic that clinics, rest to at subscription So around a critical helps SmartCare that them regards on relationship is we the In

to out tremendous. to door answers part also us they at continue of prefer be I have to able regards financially in are doing. think important is the And So I come what X% that monthly the pet need It their to outlay parents an just we're it one think, to and the And is at pet make ability to order what to for. for maintain COVID payments money cared experiencing smaller all time. their of in

Jon Andersen

bit prepared Yes, addressed is me I'm kind will success one-time clear think in something step-up that a to Is related be to And in or source was is I that of congrats this so just this the that of D&A write-down you but the sure quarter? in make is the on that nature little - maintained? something that sequentially John, you. comments, level pretty is - that of what's on the that? from Thank significant of I this one a far. housekeeping. want it. Last in There

John Newland

talked That then to we there, And write-down there the take of about was consideration million. R&D. is we did associated things into with Jon. - Yes, the two had in-process amortization $X.X increased We different also talked Capstar. I

our so, our still those specifically are result. two up, are dollars factor that are when as And way identifiables a you but percentages out, those down

Jon Andersen

Thank you. good I luck appreciate it,

Operator

go of with question next line the Please James. Our comes from Altobello ahead. Joe Raymond

Joe Altobello

Thanks guys, good afternoon.

sticking services for Obviously, down. on the see just going a So side it's absenteeism to second. encouraging

that think could of the until and of year? what budget, I'm wouldn't us and for terms terms official If give were decline in you were sort didn't significant second your the in a guidance absenteeism, you this know remind wrong, you correct year. half assuming, of assuming if number I But of you you - me see I that in

Cord Christensen

it's Cord. Joe, Hey

when organization, impact know gave COVID from internal would If that negative the let budgets, not the our you that contemplate impact our original you and what quarter. we on service we remember in was didn't happen did it

revenue that know be let So people better than was quarter communicate And to impact and says we we seeing then from that earnings we budgeted the third impact through impact. against the impact in we million budget budget. upwards that. $X of could and thought if a should that million-plus we $XX of We're in double-digits align budgeted perspective, that the see run what it it in be no trends we would plus with

the that's excited we're so case. And

the This and QX million quarter, $X.X we in a impact that budget that QX. number was to in see being organization. earnings the We lower a service definitely saw significantly for

plus So better in business areas. other is would be there doing

negative impact our a we're So margin expansion. business with product lot that of overcoming performance and

million We're million. So And quarter good the budget obviously, budget. quarter. we're our $XXX the feeling very very internal fantastic are this results for about $XXX feeling good of and about our

Joe Altobello

And helpful. expect of build $XXX in that's just it, up number wellness What where to terms million. of centers, to determines the that range, is that for like being other sort the Got $XXX secondly, guys you labor year, are but toward million this items end that the factor, you the example? continuum? from It there on you of gating would of sounds upper end keep

Cord Christensen

building think out it number all some and us had for due retail They our that construction the access partners to great want and Susan delivering us, a side. Yes, comments the building her the labor materials stores on of working the all we want have locations. referenced they've in spaces have challenges location. very They I to we They're but conversation retail to the hard. partners, the and that are

in operate they're we'll we in if we area in having be construction, needed ready the on and the everything with where the control end. of the going the will side to one business, locations operate that is our But marketplace, we're With in deliver the able delivered. upper get to open locations but are challenges be to some from able of them locations, and the them. people get So, we what doing can’t again, we'll out

Joe Altobello

Okay.

apologize again, guys close for I a to for basis? and were And And you this, missed where you're I could how are if but if pet I could, centers the pre-COVID, count numbers clinics? example wellness Susan. on one last at Just productivity one, your community that talk about you you seeing

Susan Sholtis

Yes, no.

to we back us we this that say can I data - But think because with are metrics that now, versus the relatively all really point that for I point. we at in surprise XXXX us to XXXX KPI's to acquirers a of So flat. pet delivering right of as isn't a we're pet in through layered the the becomes count But so which where useless compare double-digit with COVID. almost delayer. of compared you industry pet outperforming reopened we pet if Again, count, if but of that that - as take will industry. count in you their processes, were And whole, to count additional because of exception we've are the down. improving is XXXX, is solid very a the exception because improve veterinary everything in the we improved layering as we But COVID

Joe Altobello

is count is XXXX with what saying? So flat you're pet

Susan Sholtis

yes. Correct,

Joe Altobello

Okay, perfect. Thank you.

Operator

with Please comes question ahead. the Chappell go Bill from next Securities. of line Our Truist

Bill Chappell

the as no is longer maybe unemployment didn't services Hey and to the just its do absenteeism the - on commentary higher, sooner point you're point to at say tolerate absenteeism run thanks. go or seems not. Maybe understand But but on zero? conservative run what what expect reason turn and it I we that, you just being - it's there? I should and the past know Wanted vaccinations for as I reopen? letting any things At course, year absenteeism to later, guess, just does go side I reason Because over than like planning it I afternoon. and going Good as forward. when for into understand absenteeism

John Newland

good to and Bill you. question, hear good a from That's

the having is appreciate have our you absenteeism to business we community vaccines out there, first getting not we our to confident a without in that understand where time And strong in significant are get from having that we're XXXX had have and the of where But clinic vaccinations good that feel definitely, think them on. never such do as feel company clinic other the having most be have the I sign our employees. to survey will that back through those they drop we the We're off. feel employees labor. things. We like staffed. years scheduled for don't going a and to we first are is and that will seeing of what's able confident take absenteeism taking [absenteeism] that about commitment are all And clinics years canceled that

that's anything to we've don't to else think a don't soon. the if see We how place it. would And case. we be I to know returning first very sign add, think So I going but that's seen the back that we're Susan, good

Susan Sholtis

in to last the when I and It's good Bill. to a that, even look question. of add - manage people, due to illness. we majority be was their able into the order illness a COVID-XX. that, obviously, you go no, Yes have allowed year, absenteeism, this take at so year illness, January And don't to is away time to With for appropriate to especially quarantine through of much and

the going country again, as becomes less So think to we're I vaccinated, see that. less and of

in yes, we that I bluntly be there to So say because Did point will COVID out will time, no zero at loud? some get illness.

Bill Chappell

loud. was It

Susan Sholtis

Yes.

Bill Chappell

it the products. and and in of And - we Can on results more you distributing obviously more most from Second you quarter our and of the tick question, just on where us already I'm proliferated through give of of distribution color fill mean March least because your shipping the the own start sorry seems, third-party us season. checks Capstar. kind if of or - that gave if retailers you an before where were was at good good the products even growth it's already flea are idea it I ACV? were kind

what we business? there understand that to potential is through move as trying for just So the year

Cord Christensen

go Michael, want please? that and to do one, you take

Michael Smith

to very be healthy. the in Yes brand general, continued

quarter, look of If e-commerce. category, in you in brands the at the by it XX brand in success fastest-growing largely the Top fueled consumption the was

up had to that However, we in do some in. continue retailers distribution business pick points of we

I'd carried have For would and exact the to an to number, We've those cat QX. revised our and dog of Capstar versions say, still they updated in been the QX, the play adding SKU, modules I as example, SKU. in that's out two SKU been the but but not planograms you cat perspective, From measured in is in get and ACV markets. some of have big working of delta now north the to a and that have of who and is team SKU. shown ACV their sets. the cat it been And there XX%, that's XX% to between with XXX% pushing XX% incremental on our fill focus get to in, cat retail our customers that's and assortment SKU those into that really of very partners added be brought to

Bill Chappell

the Got of And any is ago? similar it it. of that ago or year - mean, levels I fairly a idea is to year what that the was

Michael Smith

Yes, it to XXXX. would slightly percent from ACV XXXX up XX% from XX%, a to it's call say year-over-year, ago, year QX XX% I

Bill Chappell

Okay, so great. much. Thanks

Cord Christensen

Bill. Thanks

Operator

There questions. no are further

I'll turn go the Christensen. So ahead. Please to Mr. call back over

Cord Christensen

for joining Thank you, everybody, today. us

year. to excited momentum and the extremely about the start year are go We strong the we of the into as created it's rest the

delivered Our product XX% business growth. accelerated year-over-year and

year forward everyone. and start employees running our our interacting to to business, Thank year. And to us overall again, saw for start able point of season $XX.X you all with led company. quarter. We're and the year, have deliver expectations in inflection for million for our sales, very it helped and and the that successful to waiting better above significantly been throughout retail to to forward participants of to these increase EBITDA and the of partners be the XX.X% or XX% and a $XXX grateful look so Our the Service having rest associates, adjusted all and the million and our segment fantastic look we've a us partners results of we for with great you other a

Operator

call lines. you your participation and that Thank We disconnect for conference conclude you please all you. does That the ask for your today. thank

PetIQ (PETQ) 9 May 212021 Q1 Earnings call transcript