CVET - Earnings call transcript Q3 2021

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Operator

Good day, everyone, and thank you for standing by. Welcome to the Covetrus Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Vice President of Investor Relations, Mr. Nicholas Jansen. sir. ahead, go Please

Nicholas Jansen

Chief Good Ben QX thank your be Sitting XXXX are prepared and then President afternoon's Dalton. our and Matthew us Vice remarks, Matthew Executive on for to will for happy questions. call President and our Wolin, Covetrus' Earnings Financial Ben will Officer; afternoon, you, take and you Foulston, Officer. and Chief joining this Executive and Thank we Conference with Call. begin

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

be believe, with will, of identified terminology [indiscernible] as such should terms. similar may expect, these words Forward-looking or statements

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

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

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

Ben Wolin

discuss for today. a driver highlights and welcome vaccinated Thanks, hope joining family my I is us of afternoon's pillar Nick, holiday company's everyone rest broader shareholders. prepared from briefly more from value the customer Good and key of this hopefully focus leave. a your of technology overall some to up creation On the quarter will getting on upcoming which friends. normal then our our paternity thanks value with the I season for healthy, a proposition remarks long-term is and and back call, and gearing everyone, afternoon, staying of and to strategy, Covetrus' the

to turning performance as organic North $XX continues America million quarter. as with to XX% proposition net by non-GAAP grew QX, the healthy market. team increased in well resonate had quarter, XX% broader year-over-year Now third continued the where our the good end delivered market as solid and sales adjusted execution year-over-year, great by value EBITDA non-GAAP demand. Covetrus another in to

year-over-year an headwinds to recent EBITDA flow-through headwind corporate the and solid the increase leading to historical tied XXX $X basis in did in which markets, in proprietary point fees $X $X expense. our adjusted exception of our Germany gross margin. U.K., year-over-year legal other XX% of profit year-over-year gross unanticipated due loan intercompany brands Unfortunately, we all to million a delivered offering of to a our With from million have million FX and developments, results, total gross profit not and increase technology created and

we to to This sales the Encouragingly, QX reacceleration in proactive increased of prescriptions number clear the favorably the QX. in within growth have adoption net increased ramped of increase going XX% our to XXXX delivered year-over-year cohort any every continues digits in of back where One XXXX before faster continues in was XXXX, highlights than to to the recent quarter compares all and year-over-year. and continued cohorts growth our them. America, North the visibility cohorts grow. public, original double service our of in cohorts business as prescription XX% And sales net the management since to grow auto-ship going with and have most

which potential leverage Covetrus a We which solutions, now $XX quarter, years also year-over-year business the saw brands. on other management, sequentially. proprietary non-GAAP more margin just breakeven than PIMS, In business this to in X adjusted a margin solutions, where increased communications excellent business consolidated the than million in non-GAAP during high-margin this EBITDA expansion more pace is SmartPak and grows XX% and deliver doubled delivered long-term compares QX, XXXX, to for short EBITDA in for administration, payments we our including business non-GAAP wellness highlights as XX% in solutions, our prescription ago. plan adjusted EBITDA alongside This

of announcement, took integrated earlier portfolio through an a acquisitions in on a major during AppointMaster, solutions VCP, veterinary we and wellness; platform market-leading provider practices. highlighted the quarter As for the step for the third of communication forward this

we we technology, We access to are our clearly see our leverage and capabilities investing in scale channel these and integrated our the opportunity and of significant total in solutions. ecosystem new next-generation portfolio as

better adjusted any segue Covetrus. veterinarians million At provides is is and to substantial almost and business EBITDA. that at software focus our company, business opportunity our now at industry. the combined in the That prescription SmartPak annual a on Although everything across million services we do sales $XXX offering and on in $XXX in often non-GAAP nearly global helping great and it This management, drive is calls, these a is management health recent outcomes. subscription X important note technology approaching we quarterly with on Slide centered to growth, technology

strengthen of we businesses our as and of to revenue growth our customers stands pet that in-clinic have While from steady and our our chain proprietary our parents. proposition the base relationships world, solutions appreciate come portfolio to growth scale better customer investors the products drive unique value technology supply our with pet and and around their health efficiency,

practice straight pet their medical AutoShip proactively delivered months a over practice sign that has followed their manage allows Covetrus and e-commerce e-mail our storage, actually owner's veterinarian, at PIMS, now medication the system, begins and practice an telehealth Back plans solutions. the veterinarian to will to that this parent of home, compliance the prescription communications text treatment the financial which drives to using path over and home. prescription a manages and care, drive our It right and appointment a already tool. personalized up pet use with this medication significant parents, how from appointment at wellness business. management programs run Straight also via point this their Via metric information platform. and powered pet our provide with with receive management provide industry-leading and now the our the via workflow explain from or plan that solution, practice online connected can via veterinarian the parents pet out reminders have veterinarians via Today, care a effective relationship of year. X can veterinarian PIMs pet improve platform. is at the portfolio our This last To same upgrades solution solution, booking the to medication next our connected shop seen parent. continue Covetrus up prescribe compounding profitable communicate to and with creating pet patient parents administration a online journey practice, at practice, subscription and me is enable Covetrus' can their Once booking visibility an by This can works. a pharmacy. Let

cloud-based next-generation Some now are highlights of live beta solution, the U.S. of include quarter. the our this Australia launching PIMS in and launch in first, the a which

imaging with diagnostic Second, our significant enhancements to integrations and partners.

relationship; to beginning our the ImproMed. we integration improved Fourth, care, of leading plan wellness it's software solutions, out-of-market journey, prescription solutions the on-premise operating further a to e-commerce With management for support such that better blending but PIMS PIMS to a to it's tight PIMS of of vet into technology data of and system fifth, strengthening and true. say technology improvements complete are workflow continued true just substantial our and VCP's a hard and our practice. business, at administration the interoperability, a pet Third, standard

to strong will the of platform, growth our Over clear that it's helping years, our market With Covetrus bright. leading quarters the solutions end intent veterinarians with is succeed. future enhance all continue coming and technology and the industry's

Now I the call to results. our turn financial QX will over discuss to Matthew

Matthew Foulston

previously versus legal-related results. financial Thanks, marks and basis results corporate adjusted America performance I my review focus and Ben. commentary we where GAAP where applicable. $XX than year-over-year Markets comments strong Please XXXX XXXX and quarter costs points prescription detailed on of consolidated X% North and additional refer positive year X another unanticipated decreased results to including non-GAAP measures APAC margin continue disclosed of of company's And our joining results quarter, adjusted organic expectations. and period. be today's impacted scale XXX Good and to more non-GAAP provide us across EBITDA Consolidated third third in and Emerging for to sales The prior on German We operating thanks the segments. non-GAAP of for press third The net description more the afternoon, everyone, trends delivered non-GAAP reconciliations release segments. non-GAAP & gross well year-over-year our challenges all a to financial our on year as doubled our FX during Slide encouragingly quarter businesses the X. of GAAP our in improvement as million. in results full Starting U.K. will of will X% negatively quarter today. our and management, EBITDA now year-over-year increased

leverage with X.Xx M&A in in targeted underlying QX. Xx leverage modestly returning ticked earlier. in that of cash the generation Ben to activity referred was QX. Net Additionally, our to free cash of to million flow up $XX We QX because range anticipate net strong,

by non-GAAP an we as on turning German were Covetrus $X.XX tied and the more disclosed X. impacted the our challenging XXX both markets markets in demand sales in companion half reflecting healthy net the growth in volume lapped QX, animal Slide basis, of points. U.K. surge end continue year-over-year net backdrop last Now the market market impact year increase second the and a comparisons, results, details to across challenges sales of X% against approximately of year-over-year reported COVID-XX organic to basis year-over-year The negatively on non-GAAP dynamics. company's during with of previously to organic many billion

we in have markets operationally, these has which impacted seen stabilized a recovery While not have yet volume, profitability. sales

this cost taking will structure. term near action better We on to front further align be our

products margin underlying XX% year X prior period. basis by XXX versus was to margin and by Encouragingly, of second XX.X%, in the company's services, and gross from management. where represent led in company's the Consolidated of margin profit, basis XX% company's e-commerce gross these segments. points of gross X. year year-over-year, The in versus of the year. and XXX approximately the with prior strong profit technology, performance gross of year-over-year, basis the an increased Covetrus XXX gross increase consolidated proprietary strength QX businesses all this XX% Moving points profit Slide points quarter expanded increased now driven period Collectively, growth healthy expanding prescription

EBITDA America decrease in million Turning Slide developments. X% including combined as impact in a more included professional legal in reflected adjusted period. Non-GAAP quarter and a loans offerings product of profitability impact rebound corporate in than year-over-year the on to the Germany sales expenses, results, the million $XX well was and will $X U.K. would our trade from $XX intercompany in Emerging freight $X year-over-year year-over-year travel I growth negative third the year-over-year highlight another into corporate and North started entertainment, shows to adjusted the increase QX, from million APAC I are encountered X% from to compared in & an the decline, due in of restrictions during strong non-GAAP decline COVID-XX incremental repriced million additional Markets. million challenges $X listed. and year-over-year as once that reflective impact foreign Non-GAAP prior These of a been be our for year again. a marketing basis the were tied million expenses, in million for XXXX a in as now and XX headwinds just EBITDA quarter has eased margin that headwinds quarter margins during fees Europe X. $X and exchange $X in higher to in recent have headwinds person primarily point also QX, changes offset The of to and expansion certain negative

period, period, XX. North a a supply QX, expanding sales year Slide from net animal and end $XX starting strong year-over-year XX% Segment compared XX Supply and the operating deeper operating period on and prescription increased reflective XX% SmartPak. well segment offset into year-over-year chain by and non-GAAP of beginning the reflecting net market XX%, year versus in in in Moving chain areas adjusted basis QX of was equine basis $XX basis. segments, North increased EBITDA including a XX, Drilling organic top points business, generating robust contribution trends, America year-over-year prior organic increased partially on healthy sales of to EBITDA sales prior strong the non-GAAP freight adjusted the labor an pressures. QX non-GAAP our as adjusted margins a year growth incremental in line the on on higher Covetrus-branded of to our EBITDA year-over-year quarter expense execution management for in increased profitability increased as XX% with impressive with increased the companion our top to growth XX% products strength million prior third in the American million rate Slide on costs segment reported continued what business, leverage.

to Moving in to business perform our from and July. software modest continues services. contribution includes acquisition VCP now a back very The well

to investments in trajectory these technology the half near beyond. in accelerate of practice new including highlighted and additional of our next with expect launches second software towards management We suite the of that building earlier our anticipated sales software our remarks, term Ben and net year of platform cloud-based that his the out solutions, next-generation

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

anticipated increased accounting highlighting of net management prescription when sales Of diet customers by XX% year-over-year marketing accounting sales year-over-year up the QX. [indiscernible], XX% approximately when with which food the reduction business. or the we engagement periods, of bounced our solid by XX% strong a million, excluding XX% approximately category to of net in finish incentives, of the sales from constraints XX% during changing year-over-year, increase This, headwind While the with manufacturer note, related owner the pet the also certain veterinary are full in In excluding to existing were weekend or or now supply net sales year policy health Same-store saw change. a food Encouragingly, year-over-year diet in our categories, both management prescription Year-to-date, combined chain to we're up reacceleration total, XX% goods pleased growth the report included that growth, net excluding driving cyber should change. buyout sales prescription we year-over-year certain enable while overall we as customers product QX, particularly their corporate exiting sales year-over-year are during XX% continued business the $XXX to year. and management recognize XXXX excluding stabilization sold. clients. to our should practice cost with XX% back underlying prescription of sales network prescription and have signs for how in activities the reflecting

normalizing approximately year-over-year and net of charge non-GAAP Turning on non-GAAP basis focus XX% for to or more quarter prior quarters margin in adjusted we LTM prescription an million, year EBITDA. the dollar management to the increased overall quarter. than double driving was team's growth On profitability EBITDA sales This increased several profitability. represents the XX% million $X prescription in investment. after QX the in a adjusted QX non-GAAP $XX reflects XXXX, and converted during EBITDA adjusted the legal the management reported of

all compounding we and XX% pharmacy the headwind on from costs diet continue We previously opening target the ongoing for new despite of 'XX discussed. revenue, our duplicate approximately have flow-through to

to Non-GAAP demand more rest we markets. our Turning across the than business European Slide the growth QX, impacted challenges in segment of Europe our year-over-year U.K. experiencing XX. XX% fundamentals offsetting which net reflecting German and veterinary and are the in on the XX% organic markets, organic sales disclosed healthy decreased negatively by are previously

strong in proprietary contributors of the of in Our results, as notable Netherlands to our markets performance a with once brands Czech Republic Ireland, our were businesses well. and operating again number

the those from challenges, XXXX cutting, -- and concrete and the markets. anniversary XXXX to U.K. taking German we growth in cost leadership renewed address markets commercial are in We benefit changes including expect return to and as headwinds actions to efforts these in and

Turning to profitability.

a X.X%. Our of declining Europe decreased the million in penetration QX combined represented $X more seen The in German rest proprietary $XX Europe markets from increased segment million, adjusted in year-over-year benefits These in than EBITDA year-over-year points and XX% to to offset to the margins basis profitability year-over-year QX. challenges XX the negative impact and growth brands. with U.K.

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

Segment single-digit by during and from points year-over-year QX exceptional sales the by margin the high and end of of period, the ongoing delivered XX% comparisons. adjusted EBITDA a basis non-GAAP Our increased rate expansion in team on EBITDA strong reported Australia year-over-year XXX sales organic in net year-over-year, quarter delivered execution year operating basis segment healthy, increase stronger net organic expanded X% XX QX. growth and during despite non-GAAP growth QX Brazil year-over-year challenging margins of XX% top points leverage the in organic another prior sales driven service. adjusted reflecting gross

We the and net in [indiscernible]. approximately as in of our acquisitions defined covenant turns liquidity X on credit in million result quarter Now spent to ended headroom quarter, up of leverage a our X.X third million turning the generated leverage under QX. We completed free available although the cash $XX $XX in to balance the million turns ticked net XX. on our sheet X.X Slide flow the in as with $XXX

range normal EBITDA QX, growth seasonality come cash flows. our back year-end, by in leverage of within during driven will expect a by our our targeted net We adjusted

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

outlook forecast America organic continue We than & the X%. Europe slightly to and APAC in net in Markets, of to net and in with sales North continuing growth non-GAAP be by sales previously expected U.K. impacted challenges includes to X% The Germany. higher Emerging

markets to As negatively points. net approximately expected consolidated are by XXXX a these XXX basis in reminder, X impact Covetrus' growth organic sales

million non-GAAP added million, experienced also includes third fees Looking but professional outlook legal FX headwinds and our to $XXX the during unchanged quarter. remains at the now at EBITDA, adjusted $XXX

the we strong quarter, healthy the profitability, where we expect adjusted of management at another prescription improved legal supply is in performance year in last in continued year's corporate EBITDA including reflecting of non-repeat look As non-repeat partially period. we growth of This North year-over-year quarter fourth expense for America, anticipate costs, growth growth in increased FX and the results offset prior chain. in the by favorable

We and also vaccine that our the business U.S. monitoring disruption the potential chain the supply on are and have mandate partners. our in may

yet into stage. incorporated not many at have our outlook, We this the given this unknowns

detailed ahead, XXXX available on in early non-GAAP acceleration Looking today, to adjusted based and growth an we but our we by driven year-over-year. expected negatively This preliminarily are sales adjusted it's plans, our non-GAAP than non-GAAP have EBITDA the specific challenges impact on EBITDA net in to $XX is in too more lacking targeting the and comment modest of growth information by the organic which XXXX anticipated German markets, versus are growth rates. XXXX U.K. million collectively our XXXX overall

in to coming with Additionally, in new an growth continued multiple infrastructure our net management growth software we healthy improvement outlook, market and in and anticipate profitability products sales XXXX.

around with globe chain anticipate continued on proprietary growing businesses brands. general in focus our supply stability the our also higher-margin We

spend tightness this labor offset economies the of the return market as local discretionary recover. Some growth and continued costs, freight be will by higher of

our I early additional over detail that, for the With remarks. turn some XXXX year. closing back will will now brief to Ben provide outlook We on call next

Ben Wolin

in tech In we Slide our investing platform to and Matthew. accelerate our our Thanks, market business on outlined are XX, to enhance and new to value opportunity. proposition closing aggressively secure

increased on our back and product platform. to driving We into and to reinvest efficiencies proprietary and operations very streamlining are focused also portfolio deliver Covetrus-branded our

we of business. in we While turn drivers This the confident and adjusted sustainable QX the shareholder our EBITDA potential in of strategy margin to strategic sales are now the long-term concludes over and driving have expansion, of session. in We our early value innings to remain believe creation Q&A and results, the certainly some call the I'm toward reported on the momentum net we the I had path above-market will noise our remarks, core growth moderate company's and our our Nicholas plan. back prepared execute as Jansen to in

Operator

Blair. our [Operator Instructions] first Here's William question, of John Kreger

John Kreger

Maybe quarters think sounded my numbers that of fourth could guys of is couple just the over food your issue go and about like the to alleviated. first where the if items be in some you last noise go had those the It you think you therapeutic of impacted kind question, maybe quarter. in

what that. of clarify So assumptions that you if on legal And you're and item? FX could just sort cost making

Matthew Foulston

it Yes. QX. fairly as we to begin to you count of have, track. far John, been things bump the therapeutic diet to stabilize hate doesn't when I behind they it's volatile hatch much situation. as off exited knock as side, because And on we saw a we take before chickens a my you've

I'd back short say on we have positive but mildly material outlook return normal quite a for term. certainly few than still order, better on SKUs the but a immediate not We to in were. that, the we're So

items, some the had loans. on FX we assume a in X our will guidance in the or that we in big headwinds tailwind On intercompany We headwind not quarter coming have other the quarter. on the

the final the reduction legal, one, exchange assuming of a then expecting basically flat. QX And expense. rates we're legal we're sizable stay So in

to items. think $X those we million I final it's as million onetime down pass largely through $X

John Kreger

you platform. aggressive? tech product looking follow-up. should maybe or sort helpful. would is that products a we And then you're revenue of we for? 'XX there quick And spend what more be aggressively said you I end, in sort specific in tracking of Ben, investing that, think or Should with assume at out That's right the the call growth, that

Ben Wolin

both the bottom Yes. Look, line. remain what driving about, the of top and we've consistent kind

But business backing off thesis. of for and in even as it platform. more opportunity, that invest want the robust us, we're bigger that the think gets don't continue basic becomes we to obviously, to I So

in going to We're the beta. of that integration it's to acquisition kind excited beta and lots the prescription that about. internationally U.S. we the the X there's version as of we're be going focus because in the very some platforms, positive continued PIMS, both our runway recent just things in market through cloud here, VCP, cloud there market And is areas mentioned We'll in well administration we're past continue which like QX customers. to So getting of and we on investment feel internationally. a in as more then or with the management our lot excited are support to a those which like our of plan in wellness from tremendous of of here

$XXX in business, it's to tremendous online, favor I is in general and the secular going we opportunity. our prepared like tech in but as million in shift right feel the almost market invest So that mentioned revenue, remarks, there's just opportunity,

in the versus So it was great reacceleration of see QX. to the business QX

So we're feeling tech pretty the that all bullish of it. about the surround for things and the platform prospects

Operator

Stifel. our is And from Jon Block from question next

Tom Stephan

I This on adjusted is XXXX is guide think to EBITDA. start the preliminary with accelerate. Matthew, said I Tom you want Stephan on for it to guide for Jon. the off

dollar management for XXXX how implied the should it growth. about Or the rest And prescription think I confidence of roughly I my in So XX% is, the between call from growth question the the XX%, were it area instance, XX%, XX-XX? guess high other? over of $XX the if and for guide business? EBITDA to we you that'd million it, the contribution to accelerate be think business do a of at maybe one have Is in level,

Matthew Foulston

excited of We and super as reacceleration running prescription in all in went the Ben were compared through, this we [XX.X growth cohorts second. the to mean from double quarter XX.X] to the digits. at management up I Yes. with were

anticipate contribution of the we growth But continuation. not and that that. business. We're in solid So terms continued number a would super we're rates ready excited about peg to potential for of

Ben Wolin

the So look I'd you gone that to million is performance other add EBITDA. just breakeven X-year only at thing it's of if the business, from $XX of

start a look margins can over rates and the how see year forward or at just you growth So the its business X, and extrapolate and roll to time. you currently expands could

Tom Stephan

kind And you on a helpful. were million just then as follow-up $XX on elaborate drivers management. a the to feel the resume margin? Can that potentially there, XX% consistent just That's Can kind right in contribution model you structurally, the solid, extent as do any forward? is of out just was of more what Or business to in EBITDA there it. very maybe there? of color the moving The that Got bit kind position quarter margins. for prescription we

Matthew Foulston

good the and I really to over fourth we'd we'd here. in strong range. rolling for that coming one of or always period XX% we quarter feel about a And I'd this XX-month say lumpiness thing in year up. And do XX% sort is the this pretty because be of think the look at a bumpiness the think XX% investments But we

As opportunity here. growth Ben much said, there's so

because lower towards time about rather biased I think end, the comfortable we're that. we to But grow. now high than pretty is the feel the

Ben Wolin

I the thing spend year. you're is only the Matthew's of $XX would don't looking at to a the The in We million alone to prescription want total growing this pharmacy billion, north opportunity. comments $XXX suboptimize of Yes. management add very U.S. business, fast,

business, see think opportunity PIMS wellness prescription really and the of invest that we committed driving that management we when around profitability it payment and into directly drive are like are or we things to will going either management. we out but So to

things All here contribute management to of prescription going those the forward.

Operator

And for our next question from Nathan Goldman Rich Sachs. of

Nathan Rich

think quarter. fourth disruption? as that relatedly, And of as supply Ben, either the business you any on period platform you'd during issues sort customers on I supply ease, come business. management stick some you've the And I if see have these started don't impact the I there with know you was into that the we willing of for be wanted to impact onto rates to about September maybe comment guess to or of the exit trajectory of onboard prescription seen back? this October could practices

Ben Wolin

Nathan, looking couple ways of a Yes. so it. of at different

and less grow a think supply this you of used disruption at historically, those of to And business. the could to another. disruptor I it things rate disruptor, the double grow was of pharma with of in kind consumer our business line a clinic perspective, platform one year diets our as And in on the put more imagine. will

drag the So you has get sense a the business. created for of diet that

in rates for I like repeat feel growth the and rate. [mids] of rates about Matthew QX all we cohort think the our the exit growth business that There's data, positive. purchase the think both all near-term commented the remarks, how really growth data, terms look prepared of and we the trajectory data, good QX in and I marker pretty is prescription at proactive here, good the in just a quite

I are pretty And performed. how you feel grow. a business short was just if out there about the would So in or a the I term, coming has think look lot was that good how of COVID, phenomenon onetime business think we questions the COVID of

feel -- that doing is of a after confident be stack XX% growing to I forward. on our year-over-year COVID, really in going X-year in quarter. so basis, XX% just makes prospects the work almost of it the even proud team us so a and both just And like the

Nathan Rich

to for follow-up the a maybe wanted just Matt, step-up then, And back fourth go in quarter. I EBITDA Great. you. to the

annual would called math guidance of you think end if range, the into you the that the correctly. I'm with low the I out, get onetime doing probably items

range would key like are of you end the of those or high items, what sort factors outside year? to that So maybe midpoint of for the the kind the the of get I guess

Matthew Foulston

Yes.

was we've first we question, pretty a and North But I think answering that really the stuff. look strong we was supply noise improvement, and the a about also the of I when improvement when got America, which FX the management at prescription chain. legal is which talked in combo

late One pricing QX. gone those think we've say, is we the will in got phenomenons be of ahead inflation bit that and cost pricing. QX, took matched would in a we of in And up X I the quarter, freight

Europe and APAC be or up drag, million there. have won't we think which I help So that will combined. $X in And us so we'll

Operator

next the Raymond for of Wilbur Elliot And question, James.

Elliot Wilbur

benefit wondering business, about within expansion products early And segment? immediately so business fact, steps of something within what in little supply a those start talking more bit it impact Or we're I of part German also that little trends? significant you will, American of those and a call, the something negative top to context managed XXXX? numbers guess, to than the which just performed line implementation had for proprietary the be about when know in more of CVET-branded this the you geographic but is just to just new Question you And had product of a about Ben. of with taking that talked overall you're referring have how there, And can the that challenges, remind talk terms steps cadence be more last bit other us is in in launches. management, impact can respect performance may and chain that the segment? of of doesn't exactly of that Maybe has terms that I the within U.K. done cost some fairly so for the performance? you're specifically to the Matt, could some North

Ben Wolin

there. totality. can all team I awesome And solutions, third-party in really around just did in-clinic job, you're this products, seeing And I growth of growth of need say, you combined Matthew don't questions start technology the the et cetera. proprietary proprietary we North of benefit in in team Yes. plans, a upon. talk a wellness some North had sell to about just with so think north that America and that I across improve of clearly standpoint, the areas the couple Elliot, From America go-to-market then brand would Why globally. an can XX%

brands a on proprietary in growth comes on team Specifically effort global brands, proprietary the saw the lot global And a a teens. total the consumer as again, XX% just so by both well rate customer-facing basis. you team strong that higher or from than America high of North that manages as the average,

of we total business GP now of bullish that growth our ago. we brand, for slide year XX% And our we're which So XX% the just in products the it versus represents a mix super presentation, year-over-year shows basis. can and technology a great proprietary business the Slide you see and our year-over-year XX% the on had there. the a in control, There's X, that

of large-scale that closer products such of excited a just own kind our and closer doing forward magic on really and get about XX% we're to million, to So number, number is pushing which be $XXX really, GP. XX% to -- getting be a of we've represent that been

that we're be brands. whether we're there. in-clinic North specific and about then So Matthew specifically a on think on business, execution. of our a I picking share sense really on all And where just us or third-party rebound probably in And give the excellent speak timing and sign America challenges up it can just focused own

Matthew Foulston

Yes.

separately very because Let separate they're issues. these me take

in in a the in had Germany of XX part that October refresh and first. Schein. that And involved I'll separation situation was Henry year, done actually last So right Schein from what effectively supplier it bit off to warehousing of pretty of getting a of first, difficult which last get occurred the pandemic. your Henry of Germany as just difficult TSAs actually was talk we was and out provider, shared and came off about to And logistics of memory, the third-party pretty that the TSA middle new circumstances. a the with warehouse, into But we

service starting a put sales really, previous in levels mentioned was of last It to kindly, that customers resulted calls, to October. and the our of we've lot unacceptable. were execution really As on it lost poor,

in timing, lap So terms we of beginning that. now are to

in in In on situation around there's from that anticipate sales the and we'd So a that things customer are it manufacturer. this quarter lost And in on and a lost impact result started We that related. of a a severe had pretty manufacturer, first X back problem fixed structure, losing come revolves far that year. a although revenue, headwind to aligning Germany, then there second. not the the U.K., of a the really and that as we've forward I'll cost we going

cost the than structure can process expected. behind take us first no certain of have going consultative to plans in in a on in markets, bit to, big to than working making to imagine a that bit revenue, is But that little the corresponding quarter, be mid And in we speak. cost we longer So way around later and longer. us like place certainly, go a as adjustments that to to having would by structure. the We're take our would and Obviously, need we adjustments forward. year-end. we make to operating little Obviously, lapping I ought reductions

U.K. terms In of Germany. us. say It magnitude, I'd little bigger bit was much just the a for is a bigger than market

a covers little on that just Elliot. your Hopefully, So us more. that's questions, weighing

Elliot Wilbur

you moves the Yes. about possibility? manage I a terms of that guess do these as think sort question, line the Great. through top impacting potentially Then cost to follow-up just how of in and

Matthew Foulston

is I going Well, we're but think to these to of things. immediately. looking not we're X recover slowly, do the One back top all line get to customers

So it's going to take time.

be. need be plan So response be And where quicker we the and the back that base, if we is where line will the growth. to towards cost to than them expect, top returns get the to used they adjust

Operator

Morgan [Erin next coming Stanley. Our Wright], from question is

Unidentified Analyst

Great.

front? versus any but some partners heading negotiations, should mentioned XXXX about into anything shifts you XXXX about? manufacturer into we you you new to in head be of with and relationships? thinking here, access vendor Do you think to by maybe think I access visibility here cell any agency lines have yet kind do conversations major next kind of your else on -- year, products or that product As anticipate

Ben Wolin

puts of in Erin, manufacturers. say, going we and in We're the any and don't the believe significant this these solution think shift don't any differentiation the general time moves excited beginnings that message be I But we anticipate at or is there's bring I'd with relationships. positive to omnichannel I to the conversations are takes that our marketplace. about Obviously, And significant there's here. always the those people negative.

Unidentified Analyst

that And a any XX% That's thinking guess in management adding and should we retention I of to longer it platform notice sequential basis. Okay. users, guess, it then was, helpful. term? sort I I Was And business, it's mean reason about more is about prescription be I but terms there XX% as grower the that? of for about than new engagement flat on a still did

Ben Wolin

Yes.

I XX% or So not growth. we're forecasting to XX% think modeling

Growth think and just going of come law the think what is in the to is sticking adds the of mid-XXs appropriate. numbers platform. of we scales. the from I here to is on the what is we've the Part to that platform large and been kind both numbers at it engagement business new

number. on a If basis, consumers the you a still look small very number it's at of practice

feel for add the we lots customers new room of room in lots to us platform. the So of running like There's running there's to business. existing

Matthew Foulston

a into year, And at back were again. I at think we'd and practice look if in practices adds tough up you get flat the to expect in time you sell that But pick and to last season. back look the that holiday It's same we quarter. make

Operator

And Balaji question, for Prasad Barclays. next our of

Balaji Prasad

secondly, think growth mean the adds? of how So again, you going the what's big just out getting the to call EBITDA and at terms or incorporates the some And and inflationary fully we we that you're and have I conversations you chain your still that expect? significant, at management in about fully? be can did your called the you component can the guidance, that reset prescription to taken that back the having that look so into of on there's say net you supply headwinds think you in to pace shifts that in least account pricing I out as guidance have

Matthew Foulston

pricing? take freight first, me Want on one Ben, last the to

Ben Wolin

Yes.

Matthew Foulston

that it, see we have there's price for We into rates massive we're for in. -- incurring coming QX a a we in didn't the if shock that. But rates we priced Yes. have in freight going

we've So provided. covered in we guidance think the pretty we're

Ben Wolin

we're question the management. on first terms of conversations And having that in then the types prescription about of

that the a the where prescription management to where general of need now with market compete in players. one in a order retail to have home think was kind solution delivery I veterinarians and to other defensive they tenor of solution one from believe advanced has

platform that think new the and willing just we shift business engagement as market platform. on by beneficial will on people long the in front, both adopt well over that the term, of to be just So of the terms in as excited the the kind to we're the general really

Balaji Prasad

trial on If your here lawsuit I can Chewy. a follow-up with with have also a

trial the So some this? give been further competition. know if going settlement let forward? Can suppressing updates provided, to of any a you're response Chewy or commenting has us make any either to take potential also you that provisions you for need that And on you

Ben Wolin

care is know will Well, drive Yes. and are a that truly within that the veterinarian, a But that comment are what say on health well pharmacies. litigation. I a outcome, active own to won't trying in positive business situated their feel the their to outcome whether we for we veterinarians business outcome our is or Balaji, obviously we be We well only and that are comfortable I position. very right promote

Chewy potential might disintermediation So -- that who -- might been have to are response up see we our heartened an customers retailer the are to the provide. like from be the in marketplace waking online

Operator

we today's for At have queue. your you, this conference questions point, don't this on the participation. everyone, concludes Thank call. And

disconnect. all now may You

Covetrus (CVET) 5 Nov 212021 Q3 Earnings call transcript