PETQ - Earnings call transcript Q2 2022

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

Operator

Good afternoon and welcome to the PetIQ Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please do note that this event is being recorded. And I would now like to turn the conference over to Katie Turner, please go ahead.

Katie Turner

Good afternoon and thank you for joining us on PetIQ’s second quarter 2022 earnings conference call and webcast. Cord Chief and Financial are and Executive call Glasman, Zvi Officer. today’s Christensen, Chief Chairman Officer, On Michael Smith, President be available and Chief Operating Q&A. Officer, for will also

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

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

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

Cord Christensen

Zvi with you I’ll review good today our results afternoon, us second discuss outlook. overview highlights, business our and financial Thank you, strategic begin of quarter then to financial joining and financial and We will our everyone. appreciate results. an Katie

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

this contributions you care hard operating dynamic the for to everywhere like health to parents of our employees couldn’t pet dedicated too. provide and all I’d grateful work without environment. First, We and thanking in their access and pet are begin by affordable challenging

net expansion and provided PetIQ, year-to-date, new company’s behind, our were of $XXX for While history. launched which expectations And up we consumption $XX our basis. of million, strategically products, our on apples-to-apples adjusted in-line brands, of below deliver we outperformed grew PetIQ which we years unlike EBITDA few were our in an manufactured the continued invested million with sales margin our to in still to and compete last gross net categories others expectations sales million. most X% have Like any be of companies, $XXX the

tighter parents a has their for navigated labor COVID in health This higher pet and was inflation less seeing and impact wellness team consumers about Our COVID, shop needs. are we how pet market. year veterinary

quarter, weather season April. start last discussed the flea unfavorable trends impacted in we of the As and tick

still weather May, improve, issue flea season. the decline While to the start increase tick and of an did however, not was offset this fully the consumption did

by evidenced the to late in time well habits sizes the of lower-cost in as In smaller and quarter, addition preventive brands experience we certain to consumer down need purchases trade weather, economic changes in started shopping environment. closely more care to this occurring to pack as

top product seven sales increase represented to half XX.X% generated of with own versus of manufactured performed how our segment few compared year of QX, light growth in up category XX%, Dental quarter highlights quarter season pleased remain the PetIQ to broader up sales of of year. million quarter. XQ tick last We manufactured of also from to the categories second XX% and net support increased period shifted flea in from XX.X% had brands And quarter product A XXXX. QX sales, of that net the year. of $X and fill We XXXX segment XXXX. to XX% the grew first was start in weakness in products last our PetIQ from the the supplements orders the expect pet manufactured prior year-over-year. over brands the the our were XX% product treats during We we manufactured of second to across of five dog the

several and a participate We continue growing tick and and as flea industry solutions to within categories largest and be such in leader of pet the health the wellness.

year-to-date consumer tick in mentioned less the first the and of X.X% weather I flea are earlier. and on Our XX% the half than XXXX, manufactured year-to-date spending we based versus habits but brands that changes up expected

momentum up are high-growth the the of our for as gain terms disproportionate we of and at XX in continued gained in we the Nielsen-measured our XX, club market wellness flea health wellness continues XX category, and fueled and grew channels. flea the NexStar. sales X% two basis this health growth portfolio for share segment within portfolio XX% XX-week XX.X% market the category position tick and In gains channels, PetIQ tick market, over-the-counter of and the same was share picked was XXXX, the segment share, share of the command points and June In the the share This e-commerce and CapStar, ended Both share while also to PetArmor, by and not which by points number the across XX-weeks segment both market. total basis led increased timeframe.

dominant have animal with pet products largest in over and and health X,XXX brand online. to a prescription portfolio sold continue to retail SKUs the over-the-counter market share We

Now, focusing on segment. the Services

we XXXX, of onset adjusted of $XX quarter net and XX.X%. revenue of quarter consecutive than EBITDA best positive of million, Our an increase This expected. was posting better Services segment reported COVID in the its sixth its since

maximize our For the first progress sequential to segment increase and XXXX. continued segment through improvements optimize results the we In Services half $XX.X our will of and of the as was segment net minimize Services revenue year-over-year disappointing parents. an believe pet XXXX, XX.X%. We to Services QX, million, make we

labor our is reduce labor to adjust First, hours schedules we when cancellations in continue unreliable. to clinic

Second, challenging wellness we the growth labor Services vet openings. to XXXX. and half future recruiting centers first six of given programs in XX our We market, we new support focus wellness our wellness and XQ, veterinarian prudent the in with Due term remain vet near labor continue to the on retention to in market. centers center opened the challenges

to the Vice an career I In our health of also as added He managing He and we division, are Services operator and retail consumer very our future extensive to growth services. roles, strong multiple to We Smith. PetIQ of to quarters. to strategic very us our the ideas and responsible help look our plans including to track already segment and for in second segment. including stability excited in their to days, begun as you is more fresh Michael and plans pet here first forward in Services world’s and lay President, all to John growth experience, of operations much in Services strategy pets to leadership fuel enhance of Pearson quarter and have team fuel [ph] with reach aspects PetIQ retailer. the reporting division, a is key Senior important growth with revenue in growth and implement with parents and wellness and out with Services an at time record more in profitability. John a affordable, John’s Head spent constructive has at optimize to largest working pet fuel incredible XX across retail, products strategist categories helping his look insight he having access] is to further [in-community sharing and perspective to add future his product

guidance I’d convenient, the Multiple provided long-term we’re services. and had industry trends the of to address products will we cover and growth and Zvi that in our to unique in support we operate categories across market, our Finally, which XXXX, annual like outlook which offering patterns of updated brands and we visibility the to When more continue growing. PetIQ’s position consumption beginning at in detail. the affordable veterinarian consumer annual the our pet

on At time, the center company to planned XXXX. this wellness fully new XX% compared had information net like-for-like as We growing openings. approximately a also total sales at the supported basis

to our start planned due the pet labor more with midpoint sales net discussed, broken market, at in in the a environment Now, expect this much vet than I can to guidance conservative guidance. economic season the areas. a three changing We we we are of taking approach parents our previously weather, main now patterns be X% flea into to openings consumption due down sales reduction of tick to and This center and slower our wellness fewer approximately outlook. the of

of weather, of due are and recover of back to a in net year. flea our result expect which as reduced expectations First, tick approximately the we one-third the half to fully sales lower-than-expected don’t sales

spending of today Second, is consumer approximately our down we continue that one-third in guide closely I changes to to outlined and monitor. due something the

have category the down we brands, be total even a PetIQ’s the years, it share. but also in in amount XXXX, earlier, the I we flea also disproportionate that tick category to expect We means manufactured that and down expect prior capture though trade seen which than supports market mentioned to and of in smaller

wellness labor final is XX to centers Third, market, had centers, expected, one-third wellness reduction opening guidance our of we than the opened the net on us fewer new sales due based area last our like number year. to a cover half we is I’d the guidance of quarter-to-quarter in for The second to the XXXX. sales much than and our first half lower budgeted we

all growth and first does happened take first the our year. the results XXXX of you full the the financial in and second tell half this our suggests doing Simply outlook, If of the updated story. not XXXX quarter half it of

consumption inventory half when It balance for of year. expect increased [QX that the health tailwinds, In the pets, pet and the to population, looking for our you customers this more and robust the compared including trend in of In XXXX parents. the of pet wellness. normalize household retail very us to an our growth animal consumption health is and closing, position been affordable of have long-term a the of penetration highlight industry very the has humanization pets, pets weeks these increase year-over-year continue convenient differentiated to by fact, in supply. for with growth the believe balance inventory to number important balancing we look you first is When reducing is events, fuel at balanced our across pet industry will year. to-date] and [ph] our growth increasing our and for continue entire along we

call the and we Our cash next continue I our Product mission to net well now over several in delivering PetIQ overview, and over well believe solid increases as the to continue teams would sales flow is our execute that to years. well as turn and on like profitability, positioned Zvi. Services to generate With

Zvi Glasman

Cord. you, Thank

simultaneously investments key launches our on our QX achieved are as We anticipated existing the and in-line planned well new and We in than net growth pleased business while with team’s expansion, margin the our as business, net our expectations the EBITDA from share controllable launches. and executing Cord for growth as with lower pleased we marketing solid gross quarter. our manage ability product of of our our the to new gains and with for support achieve growth improvements our sales were aspects income product our areas year-to-date. remain of even this to as discussed, to execution accomplished We the in adjusted brands.

when health to evolving and convenient pet pet want affordable continually to they provide are shop. our and We parents business wellness where with and

Now, key in Cord review start top-line detail focused my more year-to-date I financial on with quarter for in Since, and I results period. go our quarter the detail, through profit. will the for gross will financials

X.X% gross quarter second second XXXX, was as was increased success $XX XXX NexStar. This increase margin gross and product of in of resulting product from of product mix, adjusted to such million recently profit the quarter XXX gross last favorable Adjusted an reflects the including representing basis margin improvement the points XXXX for XX.X% quarter manufactured $XX.X launched gross the an of the portfolio, year-over-year. expansion of year. million, points XX.X%, Second basis profit margin company’s

$XX.X from million benefited quarter year. for was to QX second segment also XXXX $XX.X in second million $XX.X for were SG&A second last quarter compared of We of the SG&A compared $XX.X quarter prior the to the the of service in year. optimization. expenses XXXX, million million, Adjusted

portfolio. of planned increase As points, a period, reflecting to and accelerate to an compared our support the two was of XX.X%, of help SG&A primarily growth new continued XXX product million marketing percentage brands marketing launch of our brand adjusted prior-year investments basis of $X.X to manufactured sales, incremental the

resulting million. XX%, in-line EPS an in Our $X.X was our $X.XX. income $XX QX QX for increase million EBITDA EBITDA of guidance net $XX.X adjusted million, was of of Adjusted with

We are for for despite the adjusted our the net target pleased for still achieved EBITDA to very sales quarter QX. have lower-than-expected

the manufactured second for strength This of XXXX our our slightly XX.X%, expectations continue team We managing this margin to our on our PetIQ of focused demonstrates believe ahead quarter brands resulted is adjusted costs. and in quarter. the EBITDA of

balance to liquidity. Turning our and sheet

company equivalents $X.X As of of the million. cash June XX, and XXXX, cash had

$XX.X During the investments. second generated of capital cash we excluding operating million approximately quarter, flow, working

continue We the XXXX company. the year the to generation expect be in of cash to strongest history

an Our XX, from of June the last $X.X working same was capital million period of year. increase as $XXX.X million, XXXX,

is product than driven seasonality capital chain The both our can to and decision our business, accounts Our adequate working primarily as given of the the based of than launches. of and maintain new weeks inventory primarily inventory. capital receivable, supply, levels lower needs higher of in demand, of fund normal increase inventory, with on We are by retailer working which remain expected, the fluctuate as challenged supply of to well sell-through to due comfortable levels our timing environment.

long-term ABL, convertible loan, $XXX.X and term Our comprised June million XX, of XXXX. was of our facilities as is which debt, debt

facilities, addition availability Keep we an XX, which our $XXX on availability million expand on as million cash plus has as the liquidity, of June to flexible XXXX. define if hand our by to additional hand, the million $XXX.X of cash representing can due needed. its mind, company of facility, company credit nature revolving In of in $XXX availability total the debt on

the cash debt. quarters segment ahead, We continue build the opportunistically our from available segment, Service liquidity, well and to product pay improvement in believe company as our growth, contribution drive free consistent the in down flow to as positions the and cash

guidance already will net for reasons year to I both for focus ranges change, so Now, our our specific guidance. covered turning Cord and the QX. the sales on

XXXX $XXX to based million midpoint $XXX XXXX, million the with in-line For the we expect guidance. sales net of of on

purposes, to guidance, net of midpoint the comparative of in on approximately compared excluding the expect we period related the For lost to prior to sales X%, distribution. increase based XXXX $XX.X million sales the

with adjusted in-line expect the XXXX We EBITDA million $XX $XX of on of to guidance. the million based midpoint the

distribution. EBITDA excluding the we EBITDA approximately million comparative based to purposes, the of $X.X compared on X%, the year related increase the prior to For expect adjusted XXXX to of adjusted guidance, midpoint in period lost

our to We team mind continue increase EBITDA. the XX.X% very XXXX, our to not segment. contribution efficiencies. SG&A cost contributed in XXX to will Keep million annual approximately to The to greater assume in levels that expenses million XX.X% basis as compared assumes points Services when additional outlook EBITDA adjusted XXXX controllable achieving our in focuses also from on managing the adjusted $XX segment returned $XX Services a business in pre-pandemic approximately has adjusted little and incremental

it markets, pre-pandemic to based we eventually we veterinary While will expect labor the believe and assume the what XXXX. return to not we in in seeing prudent is occur return are do levels, on to

of our XXXX third guidance. quarter Now for

sales midpoint X% the of to based third million, We net of on the guidance. XXXX quarter compared $XXX of $XXX million to decrease the expect a of

For with year comparative we to of the sales third distribution. in-line million be prior purposes, $X.X XXXX when the the on in net lost excluding guidance the period of to mid-point expect sales of based related the quarter

$XX.X third of of an of on quarter million EBITDA to increase We midpoint adjusted compared based the expect the to X.X%, guidance. the the million, XXXX $XX.X of

In we to of of in the the for prior on third environment. year comparative adjusted excluding of quarter closing, adjusted the lost with guidance, pleased year approximately For a distribution. of XXXX million to based the expect we execution the X%, are related compared first period the challenging increase to half in purposes, EBITDA EBITDA $X.X midpoint the operating

our your to overview, With mission while for for I continuing affordable and team all strong that smarter, stakeholders, remains over questions. growth in and and several our the next we Operator? optimistic results about on are years. have to for XXXX a for Cord, Mike, We parents. convenient, Our of believe pet the of place our deliver team option balance provide of available

Operator

[Operator Instructions] Please ahead. question And Andersen from our William come with Jon go will first Blair.

Jon Andersen

Good start that also commentary to I of with I the afternoon, the Difficulty]. some late you guess and [Technical – consumer the had everybody. wanted on the

seeing to profitability? you’ve whether about little would talk So, when bit your which late for that? to you? trade-down into weather-related? guess these are think be subsequent start, think What more subsequent could of mean trading margin seen manufactured you migration or a about the sizes, your it to seen is for you’re you’ve to level consumer And which changes I what of I point some was your higher engagement good that would that lower Because it brands, often pack you

Cord Christensen

that and as I’ll retail points with the in Yeah. lower and as to trade-down end Flea effect consumers you’d having found see the Cord it most and in we category we about, that have cold started X.X to some that unusual we and started period month year. have and as with the last of question. with purchase about at to Thanks, standpoint, had as the talked time choosing We a household investigated retails, for issue for less Club, penetration and consumers into are point versus you all it across comps money and the part to that may low data is patterns, the XX%-plus the start an across household or care. year then the per Obviously, weather Smith included later go closer country, preventative is the expect From and very the season. the or is consumption the shopping normal, ran started to penetration. Michael to This snow and that and units last May, household see deal deal income, to to in Jon, Nielsen, of there to to of when May some start we answer tick see up, add then of issue which on of start we being got Online, in teens [indiscernible] they to did negative saw warm April well. household quarter, negative tick an we represents flea up pick it than sources

weather, not the if health category, that trade-down all year-to-date take overall a these for a account the it. total is at of category negative number running category taking of single-digits, but unusual you you data issues, Online, it’s the some left Club, this in which sources, including huge high-end, high look from the So, and you all category, Nielsen, when into name is the

as ahead on definitely the XX% has new had market the way that said we – have my fortunate, brands ahead our the so release that better X.X% brands we year-to-date, item expected be but what are done, a been we to placement, We’re our than season, in my healthy in running commentary performing, in launches, are doing year. based this

we’ve And right now, we’re that as conservative seeing would we that anticipating so X%. piece on the it that’s finish as modeled we’re more if we’re now, seeing right that And consumer why based see positive year a you it it, and continues approach. consumption

full-year. with definitely year not in-line our of expectations year and built tons for and category, and in tough were modeling our still when we’re but us year it’s what started budget so, our very a for a taking share very good And the we and it’s built the the

else add? Michael, you’d So, like anything to

Michael Smith

and little would echo Jon, a Cord’s add just Yeah, I bit, comments. largely

the we truly months less was more things macro some the like that of to on the that was the impacts as was of about was was ascertain and was into trying and how I of consumer, more that consumer’s environment about pressure weather if what becoming weather seeing the the flash with. back later much were QX, to we macro with being events and think we moved associated much were we clear it the challenges faced of seasonal in one March-April, category how

of outperform this results that back and continue those a the is And at throughout QX perspective we a then XXXX. over-deliver as what So, about the relative we think category the the continue signaling for and rest point, an basis. expectation half share on macro from we’re to challenges

Jon Andersen

with to new Okay, further – for bit products that’s a that looking upon products assume, expect little some build XXXX. a looking helpful. in I but innovative minute, you’ve guess kind you – launched ahead I this sticking year of

about we on I’m this to if distribution you tell – launch innovation out XXXX? look I brought the have to can that to you you innovation carry what anything as market line is. far, wrong, what think might us the And you the and so XXXX. think and to we little I’m have that me more talk you one on of that this bit can to kind how at forward Want I forward, them clear year, year reviews but forward extent your then is it front you’re further? Again, So, and about that little a based it’s into correct major in going you least bit understand Could that on planning new that? a look that looking also I’m that know be

Cord Christensen

second part. let take Michael I’ll the of part answer Yeah, first I think the your and question first

been prior in in R&D investing heavily with we As team. some new said quarters, our items we’ve

more the of extensive we made investments One a long-time.

XXXX, item. to should what have we’re increase able very other we step to what’s things, with that. meaningful it but come brands XXXX excited working the going launch a not item of now are impacts of to believe because We And to one an once on our EPA through that have in lots things, We’re it right with we on could that we’re it’s and most contribute on eventually manufactured will communicate just the for and for market. exciting performance ready

great. be to going it’s So,

you if mind the don’t part taking that Michael, question? of first So,

Michael Smith

the is that for the the goals we ahead would trending of of or to would it the item NextStar’s objective. portion relative in and the would that but challenge Yeah, actually what category, this that set where market sourcing little the than volumes, performance, about say having The feel we year and is it what it’s with obviously very and is from good means we impact retail that of share partners have XXXX. command, as in a that tick size flea I terms we’re different share begin pie a Jon, of expected conversations perspective we about

we not you from that that able did the If their that when say, into to we be EPA XXXX were and than of we focus build came started being be end who the Those a their later about good launch, XXXX part I initiative it to would strategy. some and an our very discussing will it strategy, ideal, very cycles which feel likely incorporate recall, customers their of strategies. down acknowledged further came in meant that light of the green planning bit little their customers road XXXX a

Jon Andersen

update quick kind that’s Okay, of more what’s vets? ones. you then that be two talked flow, at retain The past, that to the the the is to, – change million on of the in in flow think Services, the cash in about end year? the has right hire can, around just able just hit And any kind there last On of both cash in hear. you’ve now it there free to to would there tunnel $XX last I so reaccelerate Is any great build-out? me, and the one, center or with outlook been from one be well, Thanks. helpful. take light I’ll or you any for to going

Cord Christensen

part. flow the let take I’ll the when Zvi cash we part finish. answer first I’ll Yeah, And

goal issue one’s retain, and right recognized talking go about, recruit, with be with as no what and issue you is veterinarians. deal this we want existing XX open, far we’ve have the the opened, recruit – was their on where Jon, an the we what we currently we for unreliable know you now. we solving to or so out to going entire out partial track temp they’re getting vets all and us than out of harder how other a know feel numbers place as the that for labor. are we we’re So, better think is build for industry to running, we’re but not in us centers living working back It’s that’s to hire using labor scheduled, to year the I that you And stretch from because every working to schools word, other also battle opening by meeting the and any figure to labor we’re are hiring the with get existing long-term for hear

So, the as have hired that chosen well. XX to use were almost veterinarians stabilize another we to really base

being we’re prudent think I this our on environment, So, that’s decisions we’re with in how using labor fair.

at out it right what be to in people, solve a – doesn’t this seem it’s We’re money throwing to now and is working hard are just market to solve for we or unfortunately that it, it. but their

just the the we So, [indiscernible] have and see, as through updated first as to you it we with share ones keep to be that we’ll markets. work definitely will

want answer the to questions. question? you do the for thanks Zvi capital So,

Jon Andersen

just I Cord? on that, follow up quickly Could

Cord Christensen

Yeah, ahead, yeah. Jon. Go

Jon Andersen

them I as this? than interest, Do time. of point retailers? don’t say and try any in there to by any your they some hope up are this to How understand later, pressure sooner to running centers I Is losing and assume, but of have customers solve loss want there rather – this more are your from – they is

your this to creates mark? Thanks. thousand any of to getting longer-term goal risk that or centers a there is So,

Cord Christensen

and now They’re make opposite, No, so more the more we We’ve successful, doing against our it’s it make more locations and just have already with are can to Jon. recruit sure never giving partnerships we easier us the get to engagement that had retailers. better to vets. ones they’re

solutions and so, as and been customers understanding now. guess doing with have they more never patient I fast similar can the they’re in area. you, that also that never us them as with technical And And have their best they’ve engaged, own more bring of top businesses, they I them. they’re we tell know issues right bringing some our would been And so labor because we’re

any to So, them pushback would would have to we with working partnership don’t love we give love from more Obviously, deal and more. our up in customers. or right pressuring it. now, they we’re all But

Jon Andersen

sense. Makes

Cord Christensen

I to short-term also of I of And base hold. we successes take Pearson going really plans excited amazing things I remarks, kind think my and mentioned ways. our as some have in his to share doing number stated long-term we’re like stabilize the to in think John let a very Then start is to

So, as it positive will to, going be will being bright a right that we going we and up to as fast isn’t continue make as the it be a contributor. definitely, just want improvements. It be happen to but into spot something

Zvi, cash would to on flow like please? So, comment

Zvi Glasman

the million. on earlier of had remember flow, we last year would be Jon, flow. to million $XX this guided ran Yeah, year a you negative if cash $XX cash $XX million We

highest year think lower Given year EBITDA, be to cash ever. it $XX see our given you’re the be million rates, flow well. $XX more which we million, will that as going the And cash higher to next like flow improve to I would interest now think continue

Jon Andersen

Thanks so much.

Operator

with Oppenheimer. come will question from next ahead. Parikh Please Our Rupesh go

Rupesh Parikh

for my and taking Good question. thanks afternoon

the orders guide So, is impact what there for the quantify year? way your to guidance from retailers on back the reduced on first a was reduction, pulling on

Cord Christensen

that’s quantify it them inventory Again, back if about would in time levels weeks question, your difficult hear been across to there’s thanks well, – excess have retailer, the the QX in it’s I Yeah, think burn-off for with the took across positive. every QX, and to Rupesh. QX, in all market, on supply, QX general, to And Good – you based we burning off voice. add still sell believe but three of off. that basically in

running an eight you extra underlying weeks running weeks part environment, And the supply only more and in look [ph], in the to three this so, this our various they over supply if retailers as is you’re extended negative that been through it’s it’s in burn-off. maybe they’re consumption at this being data economic people to that’s [some] weeks and sources, categories QX these year. of were year, But is down inventory they’ve last the six where see sales the about going very some really taken consumption conservative where are good of

best the it can answer you. way it’s for So, I

Rupesh Parikh

Can need when that’s environment. Okay, that’s category. promotions just the that talk checks seeing the within that’s competitive now? you’re of I about just category. you the and helpful. right something I know normal, [indiscernible] and tick if tell current a if flea lot see can’t then to on dynamics the in you And doing you I’m

Cord Christensen

please? Michael, do that want to take one,

Michael Smith

at the Rupesh, disproportionate Michael. of I Yeah. on historical we’re not say beyond this levels volumes or aggregate, norms. would seeing sold activity deal is

generation and attempting seeing largely are are We that behavior increase the is the And pricing investment demand a results. we change. to and or pricing desired, of category actions. you would investment of the pulling those that delivering have call are not has at results tier in so a more would those to often far an been look change do in premium promotional some what at in delivering largely from I the Likely, flat the I pricing levers to in see in or seen consumer down. that would actually expected spend, three retailers It’s a But total marketing not where been last tactics premium felt been I results the say you’re be a as has in of actions months. greater they has we have of ran that. the the play pullback we’ve in a call just challenges from but the look that I the brands awareness bit bit activities say, seen across a more that impact driving tier that address generation, those some category, and pullback demand what actions a at brands. The would

Rupesh Parikh

all the great. I’ll Thank Okay, color. you the line. pass for

Operator

Chappell question Securities. next from with Our will Truist come Bill go Please ahead.

Bill Chappell

afternoon. Good Thanks.

I assume, a mean following the past months. up. these vets start also out takes think it vet just of on centers I the I you understand are I of a change the I’m really would starting it – there have to guess, the four-month of that one just why sure just seem to not understand out like have lead but visibility I would I of school, there, good in is number vets a, problem, off up Just coming kind I pretty three-month, number a the three mean and question. a, time of

it So, – tougher I six labor help not much know at or it’s because just you like bodies specific market that are don’t are? the what’s what me is understand general months these that ago their gotten So, you the vet why to and you’re hire and should changed understand that. by least market, where a didn’t three know or very trying in it’s personnel a months licenses

Cord Christensen

study Bill, as Yeah, question, believe good it at and time we closely. look me, and the well all a

I than hires, being is, whether we market, we’ve if super hires stability but labor store XX our we base, our to as our coming seen stores. after sometimes new been existing stabilizing well there’s, opening on as and think we aggressive after reliability like our what interesting more more we’re versus it’s would has XX competition even are coming quarter, make we in need anticipated existing the across

having of opening work. we XX pay to XX real what kinds type nine so, people was another that for or there that stores being or going to turns unreasonable to those is not for, of away that for story recruited used that labor is stabilize the six used were workplaces stores, are unreliable or new rates And we’re with

veterinarians, to no funny around, we pet we’re hear find it’s we’re we stabilize been and the over we’re and you if it to same other’s pool. other’s each the but it, you to moving dynamic still all now. still all do, able conferences it’s each right in every these So, it all talk about recruiters, there. is really struggling because one’s all to all go time, in like Everyone’s demand parent And

the yet, have best best the we a now. open that And down meet the stores to don’t so, where is we people right to way can want demand. to pinned And tell you, we’re doing

Bill Chappell

seems then year weather understand, then kind playing how the about guess out. and And talking of mean I back product, don’t I It inventory retailers in is – seems you would that’s because issue. it of was the at season to poor shift to same It commentary about like also it amount, is not the I about de-stock retail. a fully a weather. that Okay. certain

have year? of so, they going less even season, supply, they into now And end an incremental the and destocking, there inventory is just too at decided for want they’re – next the some reason, much or

Cord Christensen

foremost, occur. is I a flea caused the the first translates economic and when issue purchases consumers because of timing and think, the it’s tick less less a The weather about sales environment less and into issue buying inventory and Bill, more about of by the issue. of sales inventory

less balance a And other supply the more that issues season box. – purchasing, sizes, It that, based so at that as category, in on as timing that what weeks the we being on taking top is inventory their some or cases, trading component inventory not It’s or to consumers the you issue, what created out happen. causes at of some of we of study the is retailers the is on across consumption conservative of brands, pack at to cheaper buying because the they’re really look changing participating end weather it and smaller describe exactly less described. down of you in has category trying have the they destocking causes the dollars

seasonal it’s sell or whether otherwise. didn’t that stuff So,

as per And guidelines. don’t a and inventory inventory so, really the spending the that’s less unless that – destock it’s then look for reason and weeks because that’s it’s dollars consumer than really the the total, really in prior a by follows weather year. being But we just the of the at retailers

Bill Chappell

Okay.

though any overall you less that’s and the tick, trading not and interested of even aren’t it’s of enthusiasm consumers as but what products the if you’re any be for worry flea the down, you, low-end I higher-price mean going category, XXXX would not maybe they’re and sign have So, kind into saying?

Cord Christensen

private the all. the And are even retailers similar, is honestly, other [indiscernible] No, our brands their $XX, the people $XX for which label formulas And label. produce very not we trade-down very, boxes, $XX. at at doing high-end Amazon and that like $XX, private that wanting others still we’re buying play and major the $XX is where where and

for for price. still perfectly at that are positioned We’re quality veterinarian people a better product looking

are well we that in positioned So, we trade-down. think

we’re going very a to six-pack going hearts, the the box It’s $XX We’re not from down to seeing. the seeing high-end the trade down $XX or a and very, $X what people going not to of three-pack. that’s

Bill Chappell

Thanks it. Got much. so

Cord Christensen

Bill. Thanks,

Operator

James. Please Our next ahead. come Wilbur with question Raymond Elliot will from go

Elliot Wilbur

Thanks. Good afternoon.

if versus math that terms on orals the just revenue talk pets next some would on away in anticipate the the in of one new of suggested of historical significant in in up terms the a what and months, in a able the some those maybe in of compounding oral And triple of metrics the of is price? my profitability XX in stores average of older week, in correct, effect, terms overall the And pull give some terms you ask their newer of are Thanks. market, in If how of to stores a the in just product discussed? the relative the wondering trends the could that treated larger as are I the bit seen collars of to if well ticket quarter, demand key if Then trade-down to moving channel commentary in can bit and you and space, around generation outside impact parasiticide the OTC consumer question seen of gains of want of I’m from the topicals players being a other the to the parasiticides. by that they’ve newer last share Rx weather, terms category the a you’ve basically little first you experience? trending is normally of you color new First bump there a then over question business. or the and quarters. stores trajectory I’m the in just maybe, stores And number or KPIs about Cord, Services of same-store stores couple that new wondering the you base –

Cord Christensen

very out that’s the the between is we you retail the transfer retail. The if you’ve at happened I’ll at seen in And transfer years, last look a not okay. the there specific seven their years, you OTC. share pulling look of has have we five share huge to question more Well, impact pricing [Trio] look consumer the and going call [ph] if second you Trio, take the I’ll a that – there in Yeah, versus for seen that. orals the what happening parasiticides, when differential a haven’t the first. at share of years from lot looking - six the the some segment, veterinarian back significant going lot vet been shared more Trio. a there the seen plus mono the And visit not on, data cost with Typically

huge Merck have or job the – there. BI issue. So, I that Trio, the of see customers we as impacted. vets a getting upsell don’t that not have share significantly migrate some don’t space we the package, to or ticket And getting nice done the be to And think and from the seen have transferring that OTC that others a

pets someone call out, on Services per but run believe an when for From we look not up at those. kind a it’s target I we’re is translating easy our, you standpoint, something key XX% think clinic of there. to I about when metrics,

last a QX. and over we’re XX% year, since so, about that’s number pretty And significant up

per some seeing we’re pets in acceleration clinic. the So,

took changes and average between saw this contemplated QX but last QX $XX, price increases it’s number. step was had we last QX $XXX of $XX ticket, $XXX. and year, that versus so big price to Our A change year year was $XX, another we the no $XXX, in over change. the was part

care be preventative ourselves always And in that in so, doing to really [prided] minor that $XXX-visit the range. we’ve stuff that [ph] emergency and

margin to And that so, from it’s we’d in-line hitting criteria our expect perspective. and where it it’s be

doing and doing different. to not lot They’ve requiring a really to things to wait in days, and to market policies Jon that back now. the right last are clinics place, are well get community really start for in place us put the accelerated Our put XX through back we’ve XXXX in

be that of so, kind get And pre-XXXX of business drive have to we type aspirations back we kind to, without lot a and environment. profitability metrics are for putting where contributing to operating in the of part tougher having in can XXXX of operating,

that’s So, good.

centers XX% wellness tickets; want and again, coming never the store better counts months. that we’ve as would the behind into seen at how running far to go about we’ve accelerating. we XX%, seen they’re where better XX pet still As base, never They’re them be

be. little where a want to behind they’re So, them we

are believe as to but they you’ll is we obviously, just and that of be start-stop how Some the getting we see up are starting to see they’re performing in running, and able the awareness definitely and the getting that them back that acceleration. part very soon And base numbers. of

those the And optimistic to coming going working those. more value And bring of think the it, to more dollars the more dollars others to into will that business. the get into and we’ll develop how contribute they’re lot model us new talk have and and be and of – to things to excited with John what they in profit think going we’re add we’re about on they’re about I time very a so, quarters as to perform, and still I all long-term

Operator

coming Benchmark. Our next Please with go ahead. question is John from Lawrence

John Lawrence

with inventories out any left talk get you you could and high-end [lower-end] Cord, size, you the some the a bit when and there little chance about pack look that on of you sell? sizes Thanks. didn’t comment and that then you Hi. those trade-down on stocked the at [ph] is pack about retailers – their

Cord Christensen

us, We our don’t Omaha, Fortunate stuff have We issues. in inventory Nebraska. John. manufacture for

of to need. whatever levels materials We we meet have and our that. raw we’re plenty make and inventory ingredients balancing And perfectly to packaging active

showing of with in distribute going been front partners in we’ve them, long-term we Our out and for, on us with plan. them we’re trends, the

think to category In and in during chain. couldn’t risk of years last any lots extremely the comes during during veterinarian. fill do we’ve for demonstrated a XX% can I into to you get pretty every two we sales to even dollar the the inventory pandemic supply the well, being were capture they when it pandemic over have as years, able we extreme well in believe relative that through And don’t as we in the system rates tried increases clearly pandemic not inventory. So, when know, this needs meet such care few the did last the people’s to had we

half the an year. well-trained any and we’ll well-positioned back meet be of the it. we’re I see issue of to think issues So, those don’t in

John Lawrence

question Yeah. for me. Last

operational guess Just times and about guidelines, – new next coming I product couple got some quarters, new we’ve etc., intro. you’ve of changes, talked couple new then of – a

of it like more late XXXX? fourth So, say of would already is you sort quarter? coming news more this, spring be Would

Cord Christensen

to different think messages that of anytime market come and it attitude. people] we’re about grit, an do-more-with-less I sure business that people different we but a is lot tell operating that things and had recessions, are Well, there you that we’re entrepreneurial spirit, inflationary make looking at of built, everything as doing, a that the there’s procedures and that business that [these running we same into the type start talking way an was [ph],

the business. our They’ve of I acquisitions. look some at four so, acquisitions been to we’ve last over very time We’ve good years. lot made And taken a think

which same percent, we most deleveraging deleveraging on leverage companies by and in same if on that can still pressure think, one seen environment, SG&A as read a earnings sales on had commentaries, I of you Zvi’s we I on have think generate think into those lower sales, the you’ve delivering numbers. that this SG&A

is And have the right now remotely this being this way plans without – prepared that a future. the in are at put way we in deliver company to putting employing for run in those so, just the we to a prudent, risk. I year It’s it’s and together and environment think think long-term

we’re to marketplace, in is. no the relates that the changes As and that environment what big it never doing things ideas matter

smaller still tighter execute to we’re be has that a company this in get future those, there to large believe access market better for we wellness affordable there, developing of little those, market the develop pet health is the executing very these bit relationships and great that to out is drive pet it’s healthy We’re to company. trying the a a needs pet with if health a this partner in retail lots care. to help ideas with think best and there of market tailwinds people items We environment, the And out best space. economic

And we’re the year and so on where with still going. very we’re happy bullish very

not year-over-year we’re growth XX% year-over-year, we earnings market. do. growth And are and it, we’re [ph] but get what As harder said, is going to] it to tough a in X% up it’s year-over-year to but that’s [happy work

very still the our team, our execution, future. on plans performance; are bullish the for and So, partnerships, the we company’s our

gives So, thinking. a to insight hopefully you that we’re little how

John Lawrence

that. Great. Thanks Good luck. for

Operator

will Our Corey with go Jefferies. come question Please ahead. next Grady from

Corey Grady

within levels brick and think, but Hey. we Thanks then just channel? are talk you’ve inventory if any online apologies performance about there addressed and your for and mortar taking already you your this, my [indiscernible] brands and Thanks. question and business, and can about talk by which And brick mortar, notable distribution I differences?

Cord Christensen

great. be do want take Michael, please? That’d that, you to

Michael Smith

consumption falling over Cord and Yeah, QX, I in referenced is of in overhang due as Zvi throughout is QX. the – lack definitely earlier general, of think inventory that there Corey, and to the overhang that into category an

continue where at to are in There customers some some say, looking as very specifics, widely In half and week looking would a through aggregate, there’s of of we’re by going where terms brands I here brands rest and they’re at chasing on QX. of weeks I to item. inventory, inventory, half would need vary drawdown and an to long they’re other two week the That’s then work a two by a left bleed to customers weeks aggregate, QX. an off to we’re we through and customer, say, that at and a to work we about but at

Corey Grady

it. Got Thank you.

Cord Christensen

Thanks, Corey.

Operator

conclude we questions. no will now would any are to question-and-answer remaining session. There turn closing I back to like conference that, our over management remarks. And the with for

Cord Christensen

about what very a very joining the like Obviously, change have started that we of that we and to with EBITDA generating been great the blessed was is great we’re are happening such tailwinds the to had such that to delivering out of to for great for still where the when different today. address market we’re those consumer, that. sales we view a just thank off XXXX, feel was a us number and are extremely feel step to We drive market margin same leverage what doing. still everybody doing take we space the with this significant difficult it’s the and We in percentages year –

so hard I this to and we’re working grateful teams just So, to continue environment great work in think tough our results. to that deliver are the

We’re grateful for all put as things coming. exciting see ready we of continue our lean start and to to plans how into they lot and look for be and partners to XXXX a year together next retail of

as joined on dialog the as finishing us So, the Look XXXX forward and we quarter and today. forward continued Thanks, really year, everybody. we look our appreciate whoever to strongly to on can.

Operator

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

now your disconnect lines. You may

PetIQ (PETQ) 13 Aug 222022 Q2 Earnings call transcript