CVET - Earnings call transcript Q4 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the Covetrus Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to turn the conference over to your host Mr. Strategy Development. President Vice Jansen, and Corporate Nick Please go ahead.

Nick Jansen

and for full joining you, XXXX Jerome. for you morning Good and Thank us thank Covetrus' conference call. earnings year QX

today's your Foulston, our be and Vice President on Joining and Wolin, Officer. Chief then questions. happy Executive are with Matthew Officer; Matthew Executive we'll will President our begin me and and call Financial Chief take Ben and to Ben remarks prepared

our call on expectations. During fact management's and including business, call, forward-looking and expenditures. financial other today's statements All statements operational future we projections than operating based conference statements making made anticipate statements during are regarding current of historical performance, for this expectations conference forward-looking

should, terminology these or negative of Forward-looking the similar such may statements identified believe, with and terms. be words expect, as will,

section promises are differ from not uncertainties risks of guarantees and control which actual or a These statements. performance could are our at uncertainties annual www.sec.gov. of in and on to the subject risks SEC's and Securities include recent our beyond and most with and on Commission at materially reports Form Factors ir.covetrus.com are XX-K Exchange cause and which statements in on those under to Forward-looking contemplated are these variety heading forward-looking other Investors many which of future the website Risk the periodic those of website report our filed available the results

these hereof statements. the except obligation law of statements required date update undertake and to speak forward-looking as only revise Forward-looking no we as or by

to our refer to over that we a release presentation now measures to to beginning non-GAAP reconciliation slide on on With documents XXXX about information those of release provide full financial deck three. also results slide accompanying discuss contain announcing turn the financial highlights results. that, it measures find will Ben our the and press further The fourth year You call can for non-GAAP today. ir.covetrus.com. this and this and I GAAP for morning's the will quarter Please

Ben Wolin

joining us Nick. hopefully this looking is time Thanks forward all safe staying sometime Good and person. day, the morning everyone in we when together hope I spend and can year, today. for again thanks I'm later everyone to

this and and outline front margin why think companion call state upcoming priorities as operational investment of growth period and end our update us. capitalize stronger-than-expected in market; the we we an for our year; and on XXXX detail the be the will will XXXX growth of On we opportunity financial provide animal on the morning, QX full year the results; highlight another progress of

on starting perspectives on Now, slide end market. three of with the animal companion our state current the

the services. the around to already enhanced service proven standards-of-care, many and and you caused new As be disruption market a have that pet world. our raised growing of for the expansion innovation demand the adoptions, companion the COVID-XX channels Increased global may of ongoing humanization has and quite products industry is of know despite resilient pets, has animal around

with activity, face Certainly factors practice market end-market were but and revenue quarters favorable there new we Our as our will driving already fueled the helped through comparisons a continue second XXXX in double-digit growth be challenging positioning as per versus might we of the which and where underlying data in spending US believe clients COVID-XX accelerated backdrop the busy half and/or XXXX. internal months by with will veterinarians XXXX increase ways many visit. moderate in ever XX% confirms higher year-over-year our XXXX XX% business pro clearly sales in XXXX year-over-year operating delivered on our the this forma on in half year. in execution growth EBITDA are opportunity our This market in organic year and evident end-market coupled net endure capitalize well-positioned accelerating and as discipline enhanced of to in four. backdrop ahead. strong We trajectory sales the driving and and back with numbers growth our years seen full we was the improved focus slide adjusted

Our business adjusted we where robust EBITDA, only expanded EBITDA across adjusted also our grew segment three performance segments but all not of margins. spread our is

forma Our by meaningfully prescription management XX% business profitability. increased net and its pro improved sales year-over-year

with made my increasing approximately Covetrus-branded solid more speak that this in progress also opportunity our of proprietary sales brand $XXX are which now average. excess consolidated I'll combined our later double prepared in We remarks. of portfolio, and are margins on million gross

and investment XXXX. affords so I'm seen with we and elements nearly improve other exceeded we balance which about external year this team also was progress net as to our yet at think us the our sheet made our COVID-XX funding a three expectations enabled financial year a the XXXX proud us meaningfully times pandemic, flexibility, Finally, strategic half Obviously, across opportunities all as and entering X. growth like on how now of approximately responded plan with slide of leverage none organic

our which That turn, We to on our in organizational market engaged exited people, in to foremost, led assets focus share our distribution our attract have better we company to greater markets in talent An certain US workforce performance. and our our we operational streamline us transformation in where motivated opportunity. increased focus distribution the improvements markets scores. We the our into company First invested forward. and and translates helped health and of the international noncore business. business significant on and drive help core French we as in drivers sold

and drive our XXXX. entering and established XXXX. number our as product executed net launched TSAs, operational client the engagement many We Covetrus-branded of start and we providing there strategies sales delivered our our of a was brand And We proud customer also be of accomplishments in quarter this exited strategy evident global significant fourth at all control proprietary prescription capabilities international markets. our we lastly, in sourcing better-than-expected successfully to us Clearly, results. to of successfully were growth direct of robust management

from the and look execution our for sustain As we date, and are portfolio higher-margin our businesses of To solutions. to X, against innovation leadership our our strategies forward products some our slide delivered position. in we and and investing to turning we our distribution of on improved repositioned initial and businesses, higher-margin focused have contribution accelerating

While our generating of certainly in gross progress good increasing elements businesses we total as overall company execute which now and profit against our higher-margin and XX% is from in increase profit XXXX, represent more than to priorities. mix our beyond made our there room sales we XXXX collectively both gross still significant more

financial we customers, will which American serve. wallet, XXXX. strategic our in of help share secure commercial our new For with we marketing our organizations combined business, North to significantly sales This alignment and us improve our example, reduce our believe cost we effectiveness created greater recently and will US believe and that grow has

also delivered the down to prescription in doubled We have strong management on strategies focus XXXX, engagement XXXX. and sustain in also increased growth have our new enrollments on our

in margins the in we to compared creation gross proprietary trajectory margin products and margin XXXX X.X% metrics of as significantly heavily these to investing and creation. the looking including distribution Covetrus-branded Clearly, compared of making of and enhance have are have traditional proposition. at we actions, expansion products. value approach are good on longer-term and our to third-party our margin our EBITDA the and EBITDA focus aspirations value and resources, path now to adjusted compensation solutions also American higher march our of delivering Drilling deeper We dynamics XXXX. achieved progress distribution, with that technology our see value profile proprietary our products and Through added could North and to in e-commerce towards net solutions we and as traditional slide anticipate shareholder XX% The solutions sales future than you and aligned products our X. sales proprietary adjusted

improvement drive all-in penetration the in inside expect products Covetrus increase to existing we we higher-margin see with As engagement our our margins. consolidated these base of and and solutions customers steady

access a customer these value the I it Slide solutions, our create budget categories work and North capital if as focus towards increased investors XXXX to also on about advancing our believe objectives. of growth-oriented for these is growth our be the higher-margin of thought And on our position and we in on to for Clearly we us moving our M&A were CapEx talk activity reach will such With as about America. levers more through in position and consolidation two-thirds seeking we aggressively and approximately Importantly, our some capital in seen useful deployment. high is we our compounding heavily we forward, deployment be margin pulling focused and market trajectory growth puts and to proprietary brands global X. skewed in businesses in accelerate XXXX opportunity future as market would are products to are expand think focused to these Covetrus-branded

made the value have it see for initiatives derive several First practices new to commercial we easier have veterinary for the during Covetrus-branded versus launched products, products ordering that process alternatives. these from they

We Covetrus-branded providing new have on also alternatives. savings, prescription our management several pet of platform products opportunities seeking launched owners for lower-cost these

example XXXX to U.S. in in in our footprint leveraging Vi new replicate sales driving developed geographies markets brands. look had Calibra by includes strategy -- and family that We've programs Vi, SmartPak marketing for supply and Europe this new and in This beyond. throughout broad penetration we success our existing have we of adoption our markets. chain to significant in owned and Second, for Kruuse Kruuse, those and the and of accelerate

Additionally, owners, this Canada managers our tradition. we supplements year, available in barn equine strong later and horse sports plan brand market-leading SmartPak on its making trainers to of with

and compounding Third, both XXXB products advanced can next we facility and And to and which and and opportunity XX medications. of over the we is for investments and enhance have new and deliver newest of increase significantly these of capability years opening designed the the offer the office proprietary launching the commercialization a pharmacy are us operating technologically XXXX meet advance products funnel pet compounding and owners. and our in meaningfully the use objectives finally, into total, this value Covetrus-branded accelerate solutions customers' needs outsourcing compounding solutions later months X customers market our most ahead. In our to year capacity our growth to and the patient-specific that

their As through number clients investments potential margin customers proposition also for major significant of an milestones technology and will year only on value with enhance for a but the unlock be of our us Covetrus. XXXX for to sales growth roadmap will our X, think active we Slide not our that will

QX open veterinary Northeast state-of-the-art and open outsourcing example, that large our in the practice is U.S. I underway allow us a deliver products half in of second Arizona to Maine expected to facility to major while the mentioned scheduled For quickly owners compounding in already we project customers market. also in more which in ability pet the to XXXX our will and have new pharmacy

the are offering inventory, Management how to services. in one a we prescription we'll of practice will XX-plus which module. make engagement is our continue unified our build-out practice capabilities to and months will new client for complete This our meantime into the Management pet manages build-out Management designed product Practice it are veterinary the compliance, This investments owner greater and improvements support platform bigger improve management. will leverage Practice and practice, added easier in practices to take to management engagement these technology offering its in One our visibility of together while our solutions creating existing but Software into to cloud-based technology Software upgrades XXXX for prescription streamline solutions the simplify that making Prescription bring and provide

For inside release QX our in solutions. a that QX. example AVImark Management functionality launched in initial to Software be eVetPractice we prescription And general Practice and will available create veterinarians allows the the

market expect throughout features XXXX. additional product to to the be We introduced

number experience conversion planned increase content. the the I and Lastly, prescription and a investments AutoShip rates owners mobile through journey buying in for experience platform of management user's technology management including personalization improving highlight consumer products delivering better would enhancements pet dynamic our and and optimizing to

and the are in also investing connectivity between and owner. pet management We veterinarian consumer initiatives the other employment the that strengthen

which position and lot a to compounding and manufacturer easier new software customers upgrades experience Covetrus, it both XXXX for and launching and compounding our BXB our designed partnerships, and products our in We seamlessly make proprietary including to are order integrations also pursuing distribution platform e-commerce partners for to strategic Covetrus to help products are a achieve from to customers innovation fantastic puts in to which in operational businesses XXXX, bring their our grow and solutions. our had capacity Clearly, their objectives. to aid we planned market of for

to turn Our momentum provide to have more in another the team XXXX. going us for we look over financials. Matthew of call is great will the market now we the energized by I forward and details success the in year to on

Matthew Foulston

details and morning results review focus our XXXX and quarter and us where I full XXXX results Thanks on of detailed Ben. now will provide trends quarter description our refer everyone into non-GAAP the a will more and provide fourth Good additional comments today's my for joining our year to items thanks impacting be applicable, our underlying The year financial today. the businesses. insight guidance. of results. full for as press XXXX fourth GAAP our most Please these release on

during XX on XX, summarized quarter. Slide finished fourth all and Favorable a operating segments fueled increase XX% versus basis points momentum strong conditions quarter. expansion of businesses As the adjusted across in with our we adjusted contributing fourth EBITDA drove year-over-year and year-over-year expectations to reporting end-market XXXX with growth three for margin our and our the outperformance EBITDA execution

X.X with ended times the $XXX equivalents million we improved liquidity, including and Additionally, and approximately in cash to our balance cash on of leverage $XXX year net the sheet. ratio million

starting full tracking market our geographies, across in year underlying and to levels year-over-year reflecting sales the XXXX, major growth details sales and approximately Covetrus and sales a income healthy position of animal year-over-year XX% reported quarter QX, $X.XX on Organic or in our statement management Slide Turning number the the markets and top was XX% basis. execution at pre-COVID-XX the of prescription are XX. market XX% increase above that of companion were during the an fourth net trajectory net the of for business. billion on trends a key positive our our improved at

While there positive conditions will detail execute on in we and items sales still XXXX, capitalize were growth. which strategic impact net our growth I strong underlying year another later, in some that as Europe investing consolidated for we end-market priorities, will discrete anticipate of while growth

XX. contributions quarter from million million Slide prior segments, EBITDA & $XX complete our Consolidated we the XXXX, as from the compared a North as growth offset The in and which overhead the America of company. impact than build-out strong necessary Emerging improvement fourth of to support $XX independence the XX% year-over-year was year. adjusted Turning more non-GAAP scil continued of and the public APAC to for infrastructure to Market divestiture the reflected our in

company to that reported in million the as the came also year XXXX, for $XXX on compared $XXX COVID-XX I quote the non-GAAP adjusted a offered offset of in million, by adjusted by that reporting in and businesses For would improvements was new our the North the results impact EBITDA partially performance the the note significant three increased November significantly as growth as support despite public in earnings uncertainty transformation prior business contribution reflected full our full contribution year, consolidated from XX, in care. earnings animal XX% profitability initial This shown all actions. of was Slide divestiture the our in management million year scil to reflected the guidance our our in well line pandemic. overhead growth at as to million ahead $XXX and of corporate prescription EBITDA year. year-over-year top guidance increase supply XXXX this time The chain created the in from cost-containment segments, $XXX aforementioned last healthy which America and lost

our given in exceeded bonus Additionally, increased there year-over-year headwind expectations. compared accruals million internal to was stronger several a tied also that performance XXXX XXXX to dollar financial

adjusted points for EBITDA year-over-year and quarter our XX% year-over-year versus segments business management sales growth sales expanding another XX EBITDA both operating prior America with and QX and in reported trends, XX. slide XX% sales segment XX. Moving than prescription greater to American year. the net the of in basis to North into net year. to supply our performance adjusted in our a margins basis prior quarterly commentary the organic increased slide increased on segment chain in on on contributed positive compared growth our deeper beginning North XX% fourth net Strong quarter starting Drilling segment

well and million sales third-party for prior $XX External fourth to XX over sales the wins, net $XX companion certain double-digit that leverage benefit account prior significant and deliver the position. chain the EBITDA last year they year by our driven as the year-over-year a chain our adjusted US manufacturers end-market were to million business from Our approximately relative the during supply indicated increasing year improved market. and months reflective with the market data increased to of growth animal demand reducing supply period. better as in organic US new relationships Encouragingly, QX distribution share of distributor market XX% position our net in X% grew we compared the improved market the business to healthy full to quarter in our in profitability number improvement organic utilize able execution

was software business generally and stable for American full quarter the North during Our the year.

are drive capabilities software As expect our Ben mentioned we making in growth and XXXX earlier, in beyond. significant that investments we to

to prescription North business in America. XX management and Turning slide our

of XX% the XX,XXX quarter compared of platform. we year million quarter XX the we approximately year-over-year additions During net the during ended increased to during the $XXX fourth net note, to sales added third XXX fourth Of XXXX, more practices XXXX quarter. on new than the enrollments net with and

prospects year XX% as growth year-over-year during had increased for of platform in first experienced cohorts force full over cohort acceleration engagement practice customer in rates double-digit continues XX% We practices new sales the veterinary the well growth prescription to as an above similar defined QX the platform the year-over-year sales good net sales all an once growth cohort net and benefit client and which quarter sales suggests year XXXX. in Encouragingly, have was and management strength full XXXX. net business number XX% the funnel data a for ahead XX% sales an the year drive on XXXX most and year-over-year enrolled company from growth XXXX increased Impressively, in the tracked the again pre-COVID-XX trajectory productive history. third same-store on our reported or to XXXX Same-store strategies. year-over-year QX of The aligned the prescription enrollments XXXX cohort. our of year was delivered and early customer as management in earlier

or to make at $X giving underlying of EBITDA reserve litigation prescription historic for a a First excluding We our with financial when during performance in $X year. also scaling taken legacy continue adjusted prior the million the Vets million quarter business, the management QX million $X million legal $X progress us of improvement versus Choice,

the year net our the XX-month forma when which of and year-over-year is adjusted target dollar XX% the on XX% full XX% For sales adjusted to a rolling basis. growth the pro legal for high down dropped to in end reserve, of EBITDA, at

XX-month As to period tend reminder, and over metric in at a the to our believe be disciplined growth driving best is investments looking we success a quarter-to-quarter this in lumpy therefore, this way evaluate business.

in increased the our our Romania. performance in Netherlands, by QX markets full Slide these and European presented Turning strong the our and QX growth offset challenges in X% weakness Germany net team, Ireland execution healthy business helped segment XX. year-over-year for Strength and European X% sales sales businesses net reflecting operating end-market COVID-XX. from sales We year, the had by and to on France. significant Organic organic in despite

of than at as the end given as will Germany XXXX in collectively business our anticipated revenue market year, challenges. exited relative levels. in not supply low-margin to the two France XXXX more transition million by smooth been we XPL our reminder, $XX a As These and has reduce items chain

flat Spain year-over-year our XX% growth. noise JV FX, operating declining QX sales Turning adjusted divestiture margins It's expanded basis the European European and impact EBITDA segment note underlying margins mid-single-digit on the the around XX at year-over-year exclude and EBITDA $XX points reflecting the of impact that, organic segment X.X%. we adjusted in solid scil, XX of if in basis net important with of leverage to increased to profitability. was million to year-over-year points,

& APAC our XX. Emerging segment to Markets on Slide on Moving

and reflecting Our year-over-year organic year our sales XXXX strong for maintaining full execution. recent both a our QX XX% momentum sales team and delivered in net increase

in year-over-year strong driving more we QX, Zealand. modest see to from double-digit rates as basis XXX margin XX% continued Gross products. with Brazil Segment make cost continue the to as net QX operating We strong XX good points basis New our year-over-year expanded by progress adjusted discipline. gross and sales leverage driven EBITDA in as growth in proprietary points during and growth improvement increased margins positive margins and better-than-expected well Australia year-over-year, expanded by

period. back QX items share. to special consolidated as QX Turning million amortization per loss net $X.XX a during intangibles, was items income, well which GAAP $XX excludes the Non-GAAP loss adjusted or and million million of briefly net results. was $XX diluted our $X other as in prior acquisition-related versus year

our on balance Slide Now turning XX. to sheet

third the Our at of fourth now sits X.X reported times. turns was range of end three end net quarter to long-term leverage compared and top targeted as X.X the at to turns quarter the our end the the of of at X.X

compared in pursue sequential X.X our year-over-year $XXX leverage net with expense was net improvement enabled and covenant our ended Our reflecting balance our flexibility headroom amortization as for have which available ratio of investments under and prepay XXXX, balance growth in leverage nearly will at position, XX, to turns more our in With as $XXX million year-end. the decision of and a in opportunities. agreement. on much this EBITDA in loan XX, XXXX defined $XX both principal QX external with to QX reduce September at cash stronger fund in interest We in now credit during in liquidity sheet adjusted last generation we internal the to improvement approximately positive by primarily December XXXX, million Underlying $XXX to year. dropped our million term our million December the $XXX,XXX cash than year, XXXX

XX. as XXXX our guidance, to outlined turning Slide on Now

momentum entering We investments as growth, with million the the to the our planned impact in $XXX discrete of to Europe. well we forecast as of support have continue across of $XXX EBITDA future in million adjusted many the underlying challenges to businesses balances for XXXX. year range outlook This

prescription in growth sales decline trend transition, seen mid-single above-trend to markets in end-market XX% year-over-year the that an assumes outlook With driven our year-over-year of our in rate of versus in is closer by by and and market to to the to this in COVID-XX. XPL many Europe to XXXX, line and digits to year-over-year the in to XXXX Additionally, continued is XXXX. historical manufacturer year-over-year a supply an Germany in approximate decline growth North in forecast organic loss to XX%. an XX% in ongoing expected high-single-digit framework net mid organic net on net This will year-over-year low-teens XX% growth strong X.X% management customer that which expected be growth UK America, low-teens we in mind, is expected nearly grow chain. tied year-over-year organically, to the growth basis. challenges sales performance our is in tied including market includes reduce our X.X% which includes This growth sales rates sales

an and to mid-single-digits when is excluding year-over-year In our to Germany, line our is in mid-single-digits net the markets, the expected to XXXX two these year-over-year and total in & discrete sales Emerging also in the expected Excluding UK growth off segment headwinds a low the region. in on market expected organic growth low year-over-year Markets European is grow APAC basis and in for with flow comparison. tied challenging an grow to to XXXX organic EBITDA more our million focused free of expenditures adjusted between including reflective through million, Other improvement $XX performance XXXX some of more conversion and elements transformation. XX% cash to of the of to growth which significant growth; and on be as $XX to opportunity. versus approximately of single-digits, capital one-time is which which high XX%, two-thirds long-term cash we is costs XXXX our cycle our is in guidance rates the

sales the longer target to comparisons we height our year-over-year during challenging conversion the year to the free business, and think more in last XX% temporary certain of expect we cost-containment quarterly the the pandemic the year actions prescription reflect the the investments over as uncertainty, implemented of the given to COVID-XX in management the XXXX, half EBITDA net for in of the last adjusted cash about term. tied And start flow of first to spike timing continued We cadence year. XXXX seen

of inventory XXXX days Additionally, of and stocking the selling our year-over-year markets. headwinds faced dynamics many incremental during in quarter of COVID-XX more a result fewer international comparison two of will face has XXXX as weather-related first March has difficult the a some

of approximate year, anticipate the first comparison we COVID-XX-related just prescription and XX% With brief back half turn the half over first of to of in the the of reflective lower as into EBITDA to net Taking the expect challenges as in the shipping major year some quarter. well year investments factors the certain in XX% our our remarks. therapeutic the end to consideration some of the supplier these adjusted XXXX certain and to first XXXX full sales call that, Lastly, year-over-year growth I'll as business target of at discrete year-over-year the in of items guidance. target management XX% our timing higher towards now for half end primary track growth second the the of such our dynamics as well described, in as Ben in carrier shortages closing aggregate we diets,

Ben Wolin

Matthew. on a solid year we and place In a for after have in visibility foundation good another XXXX. successful deliver efforts and XX, we XXXX a very Thanks, have slide plan delivering closing clear strong our as to in outlined and

growth differentiated and advance has customers' value and is is confidence in resonating innovation throughout the our proposition people is giving COVID-XX, objectives. proven healthy durable Our market us and to to marketplace, which end further in invest

outcomes partners confident are remarks, expand and our to in session. turn prepared This our deliver positioned our and back capitalize for I we and manufacturer opportunity will Jansen now margins. over clients value are as their improved create and the shareholder call well concludes We our Nicholas moderate strategy we Q&A the our on believe customers, and our to to

Nick Jansen

Thanks Ben.

them the of many Now the two to we to want our you possible, reenter you take ask limit as as section call. We ones. additional have we so should Q&A queue, then questions that and begin

take are please Jerome instructions ready first and question. So the to provide we

Operator

comes [Operator Kreger Instructions] first question John William Your from line with of the Blair.

is line open. Your

John Kreger

little Hi. Ben, could guys. in will the And would you've when How Thanks in you to how issues growth of region you long particular? expect very much. take Germany about bit that a it to in going more to get normalize? that mentioned fixed? talk that Hi, address you're some

Ben Wolin

will challenging to Yeah. we're and focused in early challenging from first obviously, half better the start that has, QX, able this disappointed hear into think really QX get market Thanks again very been The be coming of grow sorry. XXXX. year how do still that back -- Good expect the to of But to you. I but of team has will we next year, with our will John. it half be started the It in position transition through -- on be and was. to

John Kreger

it. in you. to new then to or Any investing compounding outlined Europe Got that fulfillment with And Asia? take Thank you're it -- plans sounds like you some assets.

Ben Wolin

Yeah.

obviously, different certainly long-term regulatory different the environments countries. that's those an opportunity. in as know you think There's, I in

our place really comes squarely the think at are prescription least on now for in focus our our it in I feel unique when given platform, in short-term sales compounding. development. facilities We North a access, like management to we is America the product investment

XXXX that line that think on growth top in the a big driver both and us. I bottom So for can be

John Kreger

you. Thank Okay.

Operator

Barclays. with line question Balaji comes Prasad next the Your of from

is Your open. line

Balaji Prasad

Hi, and of on A good results. me. congratulations morning, from questions couple the

than EM that the find America and I on APAC interesting side, at at X.X% it margin higher is X.X%. North operating Firstly,

EBITDA sense So dynamics? also both optimal can a help for And us these to these of of underlying try EBITDA regions. of you understand or the get

position a are done, of VSG, you anything Any since update in can terms the tangible to near-term? changes progress Secondly your we investment? provide now in operational and some changes see on Thank or in you. that

Ben Wolin

Sure and -- of I'll second part thing. of APAC Why Matthew on questions VSG. answer operating part your don't on I'll question the the the let handle first margins,

Matthew Foulston

Yeah.

that there. nothing, opportunity got of further the last fantastic we the really nice prescription position but region a market as platform there tremendously really been we the possibility delivering enjoy in see team for months. we down management think, that's about I XX think taking in And We've APAC. in a down fact down

So of we what our management, our around a see that proud prescription across and margins. And the focus those lot of talked in I of compounding towards work the key our performance. that's to are. where and a about and closer is area proprietary And Ben time. the EBITDA that's premium lot our really do you'll an we over the margin around enjoy where that areas We focus board XX% efforts to improve brands talked think us and need focus drive we're margins around about on the where slide investments those do

Ben Wolin

a study And as so positioned really quarter Balaji a has unique as uniquely to VSG VSG, brought with acquisition, expect relates what in the investors should of management so model. like with and them Yeah. It asset Covetrus one far is that's in obviously, a and good. things coming into selling the bringing unique that to a industry. come distribution fashion that them prescription as together group in combined whether for to we're partner as well it And members about more is compounding out coming great veterinary innovation quarters more

progress optimistic early, we about make that front. the still we're but on it's can cautiously So that

Balaji Prasad

Thank you.

Operator

comes with of Your the from next Jon line question Block Stifel.

open. is line Your

Jon Block

trying Thanks, to headwind the make million, for it the But how tighter. Great. maybe call in is scil XXXX? legal million I'll think to that overhead on and depends we million that payments. try keep tack Matthew one want the out get a up million then I'm $XX And $XX growth adjusted EBITDA million a do is so year-over-year million and A in XXXX guess normalized, but what on to $X the million $X long I Good I think corporate the $X one about to is sure the And count bonus a $XX closer to want we in what think just $XX we printed? was plus it. second Thanks. you was morning. versus guys. in quarter first there XX% big then XXXX? about pretty do guys I versus how headwind to versus

Matthew Foulston

Yes.

mentioned headwind. Let and me you That number is legal was with another on was drag in obviously scil And the that as start earnings. reserve. a

beyond we surprise a was positive what three in QX all us. expected. We had So markets for strength

And deeper pleasantly activity I their think when the going animals. with drive to across fourth and the people in markets market's to were lockdown more we seems quarter. all surprised it three

Jon Block

follow-up the that And for charge about for think Great. just corporate in the Okay. headwind? XXXX, how we the terms of year-over-year

Matthew Foulston

see in like took TSAs off had progress corporate. lot think It the nothing XX to those standup will Yes. you'll capability. make in I in we of a million material corporate getting a XXXX which of don't be really anything few up

Jon Block

of, question And Perfect. longer-term then, sort it. a Ben. Got

long-term If to about weight bogey? the you X% to and plus; and words software XX% the at management could think I adjusted chain arrive you when base out and the Thanks other you the out prescription we for supply In think to single-digits; call your alluded talk two behind to there. do of that it talk you Maybe margins or high drew if EBITDA construct. XX% timing that a that then could you just X% XX% you time.

Ben Wolin

Yes.

-- the think profit of that really XX% proprietary is services shift whether inside mentioned prepared brands my that total already or profit coming that and a mix In a is that that management. compounding company from the is on -- I now of remarks, be occurring or of prescription I unique gross business. basis to reflective is it the gross revenue are products

to other unique continue pace revenue from penetration efforts. grow, of margin going distribution those X% We those increased do XX% of driver the adjusted will at certainly the services. is think EBITDA that grow of not So to but

that path. we And of multiyear of steady that but of it's a year ambition, terms on can step that direction. XXXX a I timing, progress think think that every a first we make was reflective kind in In

Jon Block

for Thanks Perfect. your time guys.

Ben Wolin

Yes.

Operator

Your next comes Westenberg line with of question from David the Guggenheim.

is line Your open.

David Westenberg

the congrats really and year a great taking here. on for Thanks question Hi.

Europe? on Covetrus or building business Just talk the that growth in the management of kind in in can of rationale, of tough help Schein in about prescription might macro early -- about revenue it terms there. how your the synergy was a And I in Europe? about know acquisition you the kind you potential the legacy Henry

Ben Wolin

I long-term market. prescription the Clearly for think think value management. we over mean resonate opportunity every generally that I proposition is all the Yes. there's in one world can

wide the opportunities. what short-term against opportunity international versus we're the much hot here in For and a just obviously US balancing capital how company US in is we invest the expansion should

to manufacturers. So us of our or think XXXX terms is expect international I do mentioned value which the in in impact we But P&L, terms it expansion. an the customers don't think I can in we under that like market UK, a in any pressure either of significantly help on

David Westenberg

distribution how my No. in and between And right. you that's All as PIMS thought And strategically, to prescription PIMS? bridge in share was necessarily thought think about the we then -- maybe last cloud Thank very should how of about it. use management, then, much. I PIMS think Should should and, strategic business? the about your the or you this you of obviously, how you. not a think about the have it, Got market that very terms about question. move high long-term in how of Thank we kind a we still

Ben Wolin

kind a that, very the good to hasn't while for business. And products gateway No, nexus EBITDA services. our other it's think, line top Yes. it's think grower, been and way on parts to other contributor. the top And about the clearly it's significant It's big a it of a business. of real I a of a obviously

of many Covetrus the surfacing to footprint look PIMS prescription our and in other that's do are of of mentioned opportunities that embedded into script to is of terms things one and products we management kind services. things in AVImark just one of we now eVetPractice. we'd the different that So And using drive adoption

modernization really cloud well do about to should as maintainability, an of to our in investment all a access the integrations to family. services ability of of system, a which of the and customers company products ease terms both, in Covetrus be So is the as faster for benefit across that the use, upgrades, both various

David Westenberg

Thank you.

Operator

comes next Goldman Rich line from Sachs. question the of Your Nathan with

open. is Your line

Nathan Rich

the APAC year-over-year, out businesses balanced that growth the called the kind management of Thanks to Europe, questions. of trying kind in year-over-year. supply growth seems of It you and wanted with kind North guidance the about like, of is to kind seems get and the driving the different underlying driver I'd of headwinds the that across and do flattish incremental at And of regions, business by I the that curious be taking I to be guess, of Good makes business kind of I that EBITDA kind EBITDA guess growth if think your the so view. the like the think Hi. you that look Matt, of the primary feel should America prescription to off kind chain we it in for in -- sense? business, relatively the is outlook start we top gave. is marry growth in kind morning. management we I When you the prescription that EBITDA just of guess when line with

Matthew Foulston

to profit going a of is a XX% forward. now, business, in revenue that Yes, driver that's at good down sense, nice We Germany. we've America a of to strong consistently think to going think look U.K. think, North dropping in does APAC. as general of incremental present I a the it. we it in the shown both is way a Clearly, in distribution be EBITDA bit here, and business be drag the Europe will pretty in and again strong

sort the broad As the But things think to Ben said half. see back can Germany that's think I a in of earlier, we in strokes. path we improving

it I think you got right.

Nathan Rich

to over I like services of drive that flattish. software growth standpoint. guess you business, term. And reasonable that long It's feel think obviously, business, sort what to little a to can maybe a grow very have if Ben, Because term? segment? margin you type you in relatively do kind growth accretive from that what the going like is do margin slide across of take been it's guys seems Okay. about the That's incremental And longer of the gross businesses. bit think interesting, helpful. growth we you the looking had on When that the different

So outlook segment get there. I be that just to for would your curious

Ben Wolin

Yes. XXXX was many on year such an fronts. so interesting

customer other from category about make I in I services a their think products peers and pullback. significant saw hear to business, as we think the on our changes that require to huge And that well. you

So software, to a that large to practice. we're not their just think changes to into that I make clearly, fits wholesale want position in And category.

in though gateway do we grower. So to parts to questioning, the kind of David think that, for the that of this really can digits reaccelerate out I would of mid-single other kind business. point into is us, his a and great just alluded also business Westenberg this PIMS

the around share U.S., that where XX% software a prescription market management on-ramp and market for So prescription to great with sitting assets at combination of provides the share, in X/X close standpoint for of this business two from we're like together, an management. end-user those

certainly of never base we And the its weren't have ability Covetrus. the management business, and I products evaluate did, incremental to and for for stand-alone is our PIMS we services I had XXXX producing installed the it would XXXX on it it in about how well if growth basis that -- prescription business. when drive EBITDA of that a success and think both much as So, as revenue other

Nathan Rich

Make you. sense. Thank

Ben Wolin

Yeah.

Operator

questions to Instructions] I I am further the at showing Nick this would turn like time. conference back no to [Operator Jansen.

Nick Jansen

call. conferences. today's much soon. attending We with to at of for We'll coming so And Jerome. months, talk everyone all Thank in you. you several you the Thank thanks for connect hope investor

Operator

gentlemen, your wonderful this conference. you today's for concludes Ladies day. participation. and a Thank And have

You may all disconnect.

Covetrus (CVET) 1 Mar 212020 Q4 Earnings call transcript