CVET - Earnings call transcript Q4 2021

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Operator

Good day and thank you for standing by. At this time, I would now like to welcome everyone to Covetrus Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentations there will be a question and answer session. [Operator Instructions]. to call like speaker to now Mr. today, would turn over the your I President Relations. of Vice Jansen, Nicholas Investor Please go ahead.

Nicholas Jansen

year call. Thank you, for full us you for earnings Ann, and good Covetrus' afternoon. QX Thank joining XXXX conference and

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

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

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

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

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

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

Ben Wolin

you hope Thanks, that is thank given and Nick. Good safe afternoon joining turbulent everyone in. the everyone times us. we for live I

We to cover. have ground of a lot

remarks right slide dive into on starting three. my I'll prepared So

of my the And there growing and health is as company's done marks I potential years. attractive innovation. second owners be week partners. the practice much veterinary market, all customers, team our deliver Next to pace our anniversary two manufacturer, we the to CEO. of In Covetrus' proposition while am the permanent accelerated and head made We progress over has our still to proud within full last the strengthened XXXX, animal value

non-GAAP delivered We our we care year-over-year forward and health We organic increased to where towards scale growth, solutions also net sales global non-GAAP the a was net growth. X% our X% leading was by adjusted end successful steadily continue we year to brands. solutions and technology-enabled EBITDA company. year-over-year, technology than proprietary of becoming push which sales XXXX Financially, faster veterinary continue goal

the certain year, came markets the legal costs peak German and FX unanticipated of was in during financial costs our a to pandemic. some top North elevated our year-over-year from of we intercompany I non-GAAP front, tied another phenomenal higher when increased than adjusted sales by impact business, on XXXX an highlight latter for XX% year in including outcome prescription despite for success success the on and headwinds we American the to and the EBITDA XX% change net rather The planned grew developments. business our negative than the normalized On accounting would million, XX% during and more what corporate management of where UK a loans impressive year-over-year or $XX

a healthy we accelerate our build financial in now challenges these and coming adjusted net growth Importantly, XXXX and innovation of non-GAAP sales with underlying many position market. momentum we our EBITDA to as the to upon are in monetize mirror, in rearview

Turning to slide four.

we As drive many in and do outcomes, centered better of is you at everything the help we health customers Covetrus veterinarians on heard me helping have business our say exist past, to thrive.

emphasized calls, needed grow continue our vet better capabilities As pharmacies success, new we practice position tools to have new to pet We for significantly opened we our solutions. in veterinarian consumer the amidst platform for have invested business. day-to-day built competition XXXX. marketing practice their invested veterinarian workflow management stronger the address challenges, the And increased got online from and the to We relationship. to on further We two their primary acquired in strengthen only these to and a improve and in retailers. their

new also our launched to delivering support customers. our enhance products our serve clinical better care veterinary proprietary to infrastructure reduce cost We added to practice operational and while value to

Covetrus. Lastly, we customers it transformed our partner to to with our sales commercial model easier make for

slide Turning now. to five

been proprietary the platform this have the strong of and growth led value prescription to our margin enhanced overall higher has the a business, years, two the a which which last compound XX% EBITDA. clearly net resonating market in adjusted than segment And brands the our North XX% at of the billion while, including is broad-based, over management parts $X.X time the we growth grown is growth XXXX North where North America in advanced have America during annual in sales and frame. proposition reached CAGR in in has is Now American corresponding growth market. faster most sales rate delivered

in in than how ago the quote end in excites commercial points slightly and the me we with for XXXX chain, our for This using What however is our business customers all-in we services supply on solution our almost are from customers our compounding. growth of have highlights customers which our XXXX overall new for of veterinarians go-to-market accounting in All-in the North slide In of significant really management, points corporately in in more America. customers six XXXX, what the same transactional a for time six prescription show approximately early breakeven all-in two EBITDA sales we generate practice and with only process driving basis the entering profitability than than owned distribution North and management momentum in comprehensive XXXX of At year-over-year North prescription more America XX% operated presentation, during independently XXX veterinarian America's segment has fact, period. XX% growth management non-GAAP million gone both and by in model XXX years to $XX adjusted times higher. more increased practices. were basis roughly margins

penetration moving higher invest to all-in innovation strong average customers providing foundation years a in see above our rate continue growth with ahead. we in market we the and As for

and for U.S. segment, we proprietary a in emerging future. us growing APAC burgeoning Importantly. our In strategy our the brands, have that software business replicating and bodes Europe commercial portfolio global market a success aligned well a and newly overseas

Our our glimpse recent APAC along as a of the outside segment opportunity Australian financial success is comprehensive the in market furthest markets U.S. the and our all-in journey. emerging their provides on

now and five on of can technology, our higher the at our improvement of in XXXX year-over-year, gross solutions XX% look driving product increase the This these proprietary which our margin is is to way company's we in profit basis are faster distribution. across growth e-commerce seven, our coming slide where third is and seen gross times progress XX% be making the year-over-year products from services an solutions of XXX segments. than profit party points as Another

and and improvement basis they're solutions to other adopt XXXX. should to more in and offerings XX delivered customers these which beyond, point innovative detail higher chain continue margin bringing in with expand, gross will As margin consistent XXXX more shortly. buying see supply we consolidated I are of expansion market our new the We to

their Moving operations, cloud with third-party VOS be manage in create, about able communicate our approve the in Pulse to to and which drives This to and launch apps, needs. year, based system launch excited Covetrus experiences. of of veterinarians in QX new and secure by have culmination new all, of driving united practices and to two operating from and is Best North all improved we customize years in beta assuming the With a product as more platform, best-in-class central new the to the care suite standard renew That the system delivers management. Pulse, it. using will has with efficiencies with health dashboards, slide cloud-based one business almost and for daily personalize to eight. one practice Ukraine. veterinary U.S. easy-to-use plans of we expect a more platform customers Covetrus practices this into than software our investment veterinary of significant of great partnerships client platform significant call I'm upcoming the comprehensive or efficiencies than applications fit relied Covetrus of along no market innovative X,XXX disruption co-workers, veterinary customers preferred bring on X,XXX a by America, end increased teams business of pet now clients care a operating animal very of a prescriptions, with productivity community

estimate in impact Covetrus term. a a the financial Xx could is of suite to Pulse that We leverage the from increase launch customer. short versus legacy Pulse While applications full in of very the sales modest the deliver customers software

to in highlight New first the Australia the U.S., about number and a management of These the new our enthusiastic planned the offered the ascend we not international practice I in Pulse would innovations are While cloud-based for of remiss first, include pending XXXX. Zealand. solution other be UK, VOS launch

in to approach engagement to Rapport the integration net drive And optimization. generation significant priorities integrated ability Second, and veterinary to the go-to-market provides AVImark one, as on for on for our management This on-prem strategic Generation market. software priorities faster out and our Storefront come practice we Next XXXX third QX through will deeper of other will rolling that as improve strategy new late optimize overall More to outlined significantly into added launch of segue storefront our the a consumer customers consumer slide our while to this enhancing continuing later grow to new good secure year. business This include, These our next than features our nine. opportunity sales with for customers prescription experience be along year. our and revenue increased e-commerce VCP ImproMed. this solutions leading

in North software net XX Second, platform percent management driving our in accelerated sales tech year another significant net of XXXX, translate prescription growth and which sales in will growth America. adoption plus of into

positions and and to in in more innovation owning the relationship. our brand Third, bringing enhancing sixth our in increasing discuss priorities lastly, their additions believe of profitable more to and pet support further and França over detail. moving the business our recent year have for and to and the talent forward. to through outcomes, growth turn we strengthen success better consumer XXXX. opportunities. new product delivering to Fifth, great these proven do accelerate in necessary cost UK business proprietary for restoring Covetrus together will corporate with financials the customers not launches. increased taken we further we strategic Matthew of infrastructure strategy actions leveraging our only vet Fourth, platform, adoption in veterinarians Driving call César expect usage the our as the and Europe in to marketing hire, will reached recent base clients new our margin drive to the And now I and our another market our growth, without but help investment capabilities our investment their By technology and Germany. development six including

Matthew Foulston

and X% afternoon and $X detailed collective Ben. net adjusted segments another XX, leverage results release for fourth euro-the-year and non-GAAP Germany. sense APAC disclosed XX XXXX joining QX points and through adjusted margin year highlights gross everyone, challenges UK now thanks our press I increased fourth in QX more than Europe and resulting description in full and non-GAAP XX of some financial sales our the in and today's of markets of EBITDA basis offset organic to from improvement quarter. review expansion quarter will financial the year-over-year points We in full GAAP initial today. provide previously of on non-GAAP reconciliations non-GAAP in Starting way GAAP expectations. refer of Please X.X%. Thanks will of fourth to margin emerging for North $XX our adjusted be million. more on year-over-year the brief results The our year applicable. Strong the and where a the XXXX EBITDA non-GAAP basis results additional deliver slide measures the headwind to and focus results. my increased on comments basis commentary XX% and during million financial on quarter led performance us XX points year-over-year our America Good XXXX for operating

Additionally, flow, in which fourth quarter our net $XX modestly December. during and enabled cash to in improved we of our free principal pre-pay another million term of $XX required payments leverage XXXX generated the amortization XXXX million loan us

to Now items approximately to to previously slide by in QX. XX. net non-GAAP the growth continue back in impact markets comparison points. details to XXX disclosed sales prior sales. growth started euros Covetrus's to year-over-year flat sales the with prior a $X.XX turning XX% stabilize The year in growth our on German from of deliver non-GAAP organic for operations the negatively period. net and North continues and Encouragingly, basis and an quarter results impacted challenging net increase Germany UK consolidated exceptional relatively with on come have QX against of a X% versus another year-over-year billion non-GAAP positive organic year basis year-over-year America double-digit in actually sales the comparisons organic year growth net

a lower expansion across EBITDA decline point on non-GAAP many the markets. fourth XX. non-GAAP APAC on higher year-over-year the costs The America variant. chain and in XXXX our delivered legal consolidated supply with experienced pleased inter-company and third omicron UK the were for growth EBITDA X% in much considering full XX, growth we in margin quarter businesses year-over-year period. driven increased drag a by and Consolidated $XX XXXX the adjusted quarter. EBITDA driven during million loans Turning the emerging losses APAC to million slide pressures North segments, quarter We more and driven were primarily year margins cost offset increased and improvement and particularly by the during on also the disruption QX, of but of was were in by global year-over-year $XX challenges. driven the the experienced the markets, German $XX XX which led North by FX the UK year-over-year XX% than our in double-digit collective million Europe million, in America adjusted the than despite headwind growth Germany year markets quarter Europe European Non-GAAP emerging during that XX% APAC operations, our to about and $XXX emerging growth, of to The was XX% the adjusted slide particularly strong was and by moderate prior America. basis of in in fourth our and X.X% strength from growth North markets flattish challenges year-over-year highlights proprietary strength and rest brands. a which compared

to on that $XX increased negative million approximately not increase is While XXXX. XX% corporate which unanticipated was of expected exchange expense foreign impact year-over-year, an repeat loans, intercompany in

on of to XXXX, headwinds. still were margin Now EBITDA to basis XX loans. our that points deliver hedges exposure non-GAAP these reduce in place expansion adjusted volatility unanticipated able FX we have despite in these to economic put we Encouragingly,

recent corporate Our non-GAAP visibility Europe provide in underlying growth adjusted in financial cost momentum, outlook actions and for expenses of XXXX. the accelerating increased the into our taken flattening EBITDA

considering sales XX% to our in beginning expansion slide quarter, products. the organic including basis. quarter, prescription chain and Moving another adjusted year-over-year the the the our basis higher margin reported We expense. during prescription including quarter trade market of prior QX the XXX American with margin XX% particularly business period, segment-adjusted EBITDA of the on and increased expanding segments contribution driven versus delivered QX increased increased management. North pleased XX% gains delivered from expected we Segment Encouragingly, experienced supply with operating net year-over-year margins than business sales share higher branded disruption chain areas net Omicron year increased fourth management were both EBITDA non-GAAP and reflecting Covetrus and growth in XX. points supply on the in and year-over-year

accounting prescription during year. previously Excluding change have increased the XX the net we full sales and quarter for discussed, that XX% fourth management year-over-year the

in during prescription operating XX% XXXX February. are and net EBITDA XX% adjusted management full consecutive flow-through sales to million. leverage plus start management in to of percent into is a XXXX year-over-year incremental $XX strong $XX or was EBITDA adjusted nearly a January significant delivered non-GAAP increasing prescription representing million. $XX second in in of year-over-year With aspiration. conversion for sales the to meeting levels we double This trending or non-GAAP Encouragingly And by increase well XXXX, our million year adjusted in XX% non-GAAP Importantly, $XX the million management where XXXX, to qX. prescription EBITDA exceeding off incremental XX of equates year

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

XXXX Switzerland Our good quarter. in Ireland, headwinds fourth place. contributors Poland, during positive On a businesses during operating a in cost recent quarter, that the these Romania now sales to measures net growth offset with year-over-year entering helped cutting were particularly note, our sign the Germany and notable returned

Turning to profitability.

margins combined UK adjusted proprietary in in entire quarter. QX. segment the the in for XX% accounted markets typical X.X%. comparison A Europe increased during Our also basis with German to EBITDA declining metrics decline brands year-over-year points impacted year-over-year in and QX year-over-year $XX to profitability XX million growth The

sales sales reflecting year net in QX, Brazilian emerging from in non-GAAP our segment pandemic segment leverage EBITDA slide delivered markets. during organic healthy Australia comparisons points more net growth to year-over-year organic modest strong our team our adjusted net on Segment margins X% incremental growth. increased New despite these X% year-over-year driven healthy of year Alongside challenging QX delivered COVID-XX and XX% during and by Zealand the XXX operating in non-GAAP another adjusted APAC and ongoing sales quarter. restrictions and some growth QX. basis by markets growth several over quarter EBITDA on in XX, execution, year Moving markets expanded of sales in

in during sheet the balance in as cash available defined for leverage required $XX liquidity, million the the is XXXX we mentioned generated we facility. XXXX. headroom XX, interest payments combined as increases, anticipated credit revolving of under our turns agreement. principal And credit to our quarter and the cash which in purchases ahead in half under strategic $XX turning equivalents term bank executed million more will flow earlier, price Now $XXX loan free the slide And XXXX. QX X.X $XX inventory which and and net We which December, our year cash provide million full leverage this approximately year generation of our our should comprised of year. covenant with upcoming margin availability of ended than during I first incremental of costs quarter, amortization during in but reduce flow fourth with impacted lower cash prepaid million We on the our

organic markets. and to in includes X% adoption growth APAC growth as XXXX the continued The and We in North to platform, our alongside UK to of guidance as XXXX forecast anniversary Now growth the non-GAAP XX. sales outlined Germany to of all-in in growth X% outlook detailed net X% Europe the challenges turning and XX% we to emerging X% X% in our America XX% slide on X%.

both Our and seen levels, XXXX but conditions the market growth then normalized. above global below robust as outlook growth XXXX in assumes pre-COVID-XX rates market

by this products EBITDA, an over Healthcare million and of XX% released specific the of XXXX. improvement growth, over growth software annual reflects adjusted $XXX anticipate costs. prescription outlook compound two earlier lapping rate versus years. management our headwinds the coming to our outlook This at to year-over-year JPMorgan sales and versus outlook million remains year profitability We non-GAAP unchanged non-repeat the and markets Conference multiple new acceleration XX% in the continued driven at Looking our and German certain and in is our to growth with last UK market in in $XXX preliminary in delivered in corporate and XX% an challenges of net growth growth the the

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

growth discretionary market as continued be labor this return tightness of higher reopen. and of Some costs will by global the economies offset spending freight

chain but current monitor Ukraine markets, the We state our on the Russian, to not and of this might outlook supply that impact also factored situation downstream of continue the time anything at affairs. have and our the given into explicit have some global European

cost stronger we of Europe global non-GAAP With in the growth the not with timing year-over-year. XXXX, and the of flattish XXXX closing some be the Finally, that, for do be some the call actions brief growth of remarks. to XXXX to expect chain year-over-year provide specific second guidance, adjusted the while challenges cutting Ben our do EBITDA half quarterly fact expected second that given turn half rates we rates of over in supply QX, to back I'll now emerged

Ben Wolin

closing In to foundation clear have accelerated slide on outline solid growth visibility and in deliver forward Matthew. we place, Thanks XXXX. looking XX, in a plan a and

new our enhance end in-market business opportunities. is Our aggressively we value accelerate investing and secure platform to and our attractive propositions, to durable are our in market and

team moderate a call to and and turn now creation. to above I Jansen value we I execute of have deliver over efficiencies sales prepared back the by solid operations shareholder confident innings non-GAAP We business. our while journey core reinvesting blueprint platform. the drive our in of still are annual margin growth product long-term expansion, in sustainable we back our portfolio tech proprietary also drivers This concludes I'm market net focused the adjusted as the EBITDA and and company's it to our Nicholas to believe momentum our on the Q&A Covetrus-branded have in will and we driving towards of streamlining into encouraged but increased the and We're the strategy goals remarks, early session.

Nicholas Jansen

Thanks Ben.

Q&A our begin now. will We

as possible. we questions to want as take So many

queue you first instructions ask we the take please them we and and to question. limit should you Saline ones. reenter [ph], to to then the provide additional you have can two ready So are

Operator

[Operator Instructions] comes from line Stefil. from Your of the Block question Jon first

line Your is open.

Jon Block

Thanks afternoon. Good guys.

think North was the supply American $X was chain American North about fourth up, question, chain But roughly quarter million First down supply $XX XXXX revenue year-over-year. million a for the EBITDA I year-over-year.

Matthew, cost lose by chain you're do freight, management calling thought I out. So some think about grow we you North pressures a that increased the predominantly XXXX. for America North business? just supply think driven Maybe that of about XXXX, you Can the American think these EBITDA EBITDA called with out. prescription When we for

Matthew Foulston

of and That's a else would a great XXXX. prescription in pretty just pricing increased get business say big be question. we driven in we the the the absenteeism, not out also management struggled by having variant. QX absenteeism shipments to in a contributor up was we faced drops. smart the And just of unique and Clearly rate productivity we situation omicron have terms but when And our a ended couple I massive will labor, pressure, everyone rebates. we have intent missing

QX, perfect bit forward. little you little ought a and of So worse flowing I to bit think a than expect a storm

Jon Block

store please here into versus new maybe how the prescription of in to about has same-store still been say that then, be it Fair growth think prescription the management that's That's gross management. And the America? been tremendous. talk Ben tremendous might for sales and we growth should growth past modest same-store decent the know be XXXX Matthew, that timing I the I to fair question, To sales North has quarters. been, Thanks. second international over think, couple in for And enough. sort ads segue a But helpful. or somewhat clear growth have

thoughts there? And Thanks could that a guys. XXXX event? Your be

Ben Wolin

in platform. I'll two about pretty as the Yes. deliberate focus take we vocal and think X% customers market But Jon. driving ago, we only I of very Thanks on look the years U.S. had We of the had were that on a significant a consumers if utilization almost third our backwards penetration reached Look, the about transacting Matthew. clinics you of platform.

that's the X% than now that of fueled say, growth and XX% from cohorts revenue of of $XXX that, revenue and has some higher even to million XXXX. with has north million customer in plus so almost And really grown what $XXX

Pulse, think some result exist like in better that same you so much When driving that workflow I our of lot and on XXXX. more is think of platform. a focus the prescriptions about initiated and mentality a vet will of as focus about things on

So and the Matthew volume growth XX% from is of in greater And come January. share XXXX in increase mentioned number the utilization. lion greater that going to

number overall it's XX% of gave So well obviously, ahead of the plus that we as part guidance.

So opportunity and the that's mostly greater is, over to really driving propelling be to and forward growth the to still expect Would market is new all just focused majority where up it's We greater in be next XX terms going the utilization. come. of accounts. again pick that where will the X% months or XX% so. the range of business in But on the

Jon Block

Ben, on timing from perspective? comments a an international, Any

Ben Wolin

Yes. No new updates there on international.

on New being for on progress a that front, no able of that. and do news Australia UK, new lot our a But foundation which in making to are the cloud-based Zealand, lays Jon. We solution

Jon Block

Thanks. helpful. Very

Operator

of the Your line William comes John next question Kreger from from Blair.

line Your is open.

John Kreger

I Thanks. I data, see good hoping sort some probably where Hey know was might insight. guys. going. you little claims a your to trends market perspective of on sales and you able data of give more gives bit be us you

XXXX? kind trends post making sort from of phase sort what of are a normalization are stable? patient for visit traffic, still curious, in we perspective your or you COVID of Just kind spending per And like of assumptions

Ben Wolin

quarters for question. the we of things side now on Thanks fairly Yes, been has end It provided. John. for that market the stable in couple deck the a of

get You good anticipating. the that sense of of growth rates we're a some

single internationally. the high a still in growth, modulated bit So more U.S. digit little

huge honestly you the and into staffing capacity out of part But see this sure still wait by a driven customers. a issue covering from hospital limitations just market. biggest with to the other I'm companies is huge And get is think I business dynamic. driving times our -- the being in the

So XXXX we rates at anticipate gaining I just with similar being growth factor of you half look think XXXX, back the customer capacity. for biggest the if honestly

John Kreger

your you. just the to intriguing gave other, on you some Can helpful. adoption financial is you base? your and think -- Thank customers Is you're it can and it great. plan do. Okay, across sales Pulse you a Is -- beyond that force? of that to better drive on us the XX%? are elaborate the going customer the there integration adoption going what what And That's sort own stats sort of Just then all-in how to the way is drive you motivate of sort incentive?

Ben Wolin

There's really two rate. to levers thing. Two drive main that Yes. adoption

just the is various with through first business of The the platforms. us of doing ease integration

be So ImproMed, whether and into think adoption much solutions of greater integration when enhanced data Pulse so about the AVImark of or comes additional from workflows. interoperability, you it

And or so, management better prescription use any those and add-on solutions, lot of or a appointment they they're whether that integrated. be management, to get just compounding easier when

using a adoption. platform of I which of just kind So there's of the overall drives ease think ease

marketing second really you The front. the and is to on alluded which sales

specialist went the sales end ripped so, to a year approach we at one customer. now off an last as manager of model, into band-aid face QX of one account the year we're and And our unified

weren't change with prepared America's if North that always so almost you combined salesforce just not I progress, that efforts Not, possible have see you in results. it of large-scale of market any ahead been if look is sales pleased CAGR efforts think remarks really work in top the the the And where is. three-year growth combined like or a at And but the through XX% our going or would for force. of that the line

go of incentive right, obviously and to get is it ton lot but like left getting of when the you packaging we getting feel there's running a compelling a just pretty room optimization there data right, right. So

John Kreger

Thank Great. much. you very

Operator

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

open. Your line is

Nathan Rich

going Hi, management that I questions. we good think afternoon. start with should how to margins Thanks and forward. the for prescription the about wanted

targeting you margins think high I kind the of had about teens. talked incremental previously in

and the last that XQ though XQ at we're at well two think I XX%. looking quarters about above

Rx in margins thinking about talk management XXXX? back about in that the how the could that what for saw this you drove playing half So just of out you're you And year. maybe

Ben Wolin

that? So, Matthew, like you fill would to

Matthew Foulston

Yes, absolutely. year was revenue to that adjusted to you of strong. back down drop from as We've And rightly we've consistently really pointed, half range. targeting been EBITDA said XX% the incremental the

got I a in before a legal which of big think tailwind $X about had that settlement from non-repeat QX million. we we that the year was

I think strong. artificially So that's

with happy. take or it. XX a we're as right going we'll is and to it bank, be XX we'll that it close that as model range Although but I the forward way And XX, at think pleased to in minimum to the that to very do long we're

Nathan Rich

great. then, in to wanted Obviously, Okay, inflation guidance. market. I And to the or of focus on back growth the a lot go organic

now suppliers? trended of you So if price months And to wondering was if comment that you from Matthew, increases relative just a that you're wage in I your could maybe be maybe year. seeing into a the And we're how costs freight expectations much have talk growth of how about can reflected detail in on what the more much and might guidance? couple little how organic

Ben Wolin

Yes.

we're like freight changes up. let catching to always margin large can feels I continue me by me upward from we're see we you to pressure pace and get with you freight managing of it would covered price. start tell see with the and performance the But Let on as those

bit do lag suffer issue we a So there. a of

continuing labor pushing So covered. said fourth tight timing we of difficult that we the and a crown we're and very rates want don't quarter the know I to essentially a market if talk pricing., it. manage but really little labor. remain without very single mid in that, the Ben? digits high to bit have low Attrition about was problem, get through pricing all bit you inflation to but on as we're to through Labor

Ben Wolin

Yes Nathan.

be would digits that to price the I one similar the manufacturer product We think don't single on perfect expect mid from would then insight price kind have high two years to increases basis. of high but through price and gets I increases -- somewhere it single or occur consumers. cumulatively that passed it's expect But line, during year. to the expect have customers mid and the suppliers depending of where previous or to a on passed increases we largely we through to entirely digits increase seen to number almost price we to between on as on three

Nathan Rich

That's helpful. Thanks. really

Operator

Next line from question the Stanley. Wright from Erin Morgan of

Your line is open.

Erin Wright

Great.

question, relationships follow-up reflect, access are the are Lanco. that seen guidance you the your trends? single or I And high mid line terrestrial changes to what there of major seeing does buy increases that increases then, to agency but that Are historically expanded any there. to in with the top relationships instance, your to major for you're price the any relationship to sell Just that changes vendor on influencing digit margin price that compares have products, versus to guess, kind

Matthew Foulston

Yes.

think opportunities largely Again different line the Erin, with there. years. in portfolios in I previous are places as their increases own different are manufacturers have in price So and

years. product, the it's a So think on it's with but pretty manufacturer to consistent from same a --a average not manufacturing previous always year I

our different we than In or year visibility a of were and nature that have terms we're relationships to the two we in terms of years of relationships with suppliers. those I a much in when with think ago suppliers, our place both

that ago. basically are with everybody have terms come with of visibility to we of was a a all done There lack and year suppliers on still front. our So,

have and parts Second very in puts omnichannel again, really are of from cases are XXXX A having suppliers them And capabilities. the some to who same comes lot the our economics mentioned similar we an the and of takes basically in across to portfolio, solution. some leaning the different but you of that economics.

as umbrella. the online reach in both clinic same the market player as only that under consumers global well the and veterinarians clearly can are all is We in

up So are really the that's feel show really very or I headed there think on heading work we're but XX players the excited and top and out just I versus -- in where market our about four not starting the to relationships evolved XX we in other top suppliers have the have think differentiated how with we that front.

Erin Wright

Okay, about thinking growth are what the X% XXXX, The about X% right great. longer is way term? And growth that the segment then, about how Or to you should business. to in that be across that talk Europe we think And kind And of we and some commitment kind headwinds of be XXXX of embedded strategy Europe profitability your point? how the overall should reorganization this thinking the about at to market across in segment? guidance? those the that lingering

Ben Wolin

kind of market Matthew, into UK and lapping talk of the about the kind then start bridging and end guide play I'll Yes. just dynamics how of Germany you can numbers. the that and to with

end expect Erin, digit markets traditional faster the growing growth single of of the emerging we kind of terms in some So more market mid within Europe Again, rates. than markets.

growth And pretty market end the in so, that past. to should be similar

any a going have mid lot Ukraine create what's the about for don't to the into see course, visibility expect here into happen that's growth but these we instability markets, you full and of rates. some in talk single-digit going And that can translate Of to in to whether how of absent you short-term guide Matt, that year. the

Matthew Foulston

done And a actually physically. to of history bit you give little just we've Yes. what on

a go forward did of in lap. the the to those downsize leadership prepared in in markets. remarks, said QX restructuring align perspective, QX revenue. to We in better the we took with both has modest the Germany return a fourth new quarter. have to it structure as We And and From still UK cost charge

a once stop We a the XXXX. the into We talked So a second will half, get and drag of about those UK to in $XX both going talked is being markets top being drag of about being both bottom line about on we drag. be those in drag. a But million QX. year-over-year markets UK

half Our terms hope in in of improvement. back is of year-over-year get that least we at XXXX

Erin Wright

Okay. Thank All right. much. you so

Operator

Elliot the of Wilbur comes Your Instructions] [Operator next line question from from Raymond James.

open. is Your Line

Elliot Wilbur

Maybe you XXXX. some to additional respect with to referred the questions around afternoon. performance Good of some just Thanks. trends

expansion, start start in thinking particularly to a been about clinic in talked with what's that about relatively visits. that supply that might growth off helpful? may better the terms performance get And that? And call just be the negatively the overall particular and products at that previously little products have Rx geographic about Rx it in you've of least dynamic particularly the European in within the that, respect additional of any of of update dynamic share where expected terms terms have out vet utilization maybe, And growth than the what's believe detail just proprietary there products, the kind behind Maybe segment. a to stands in management, of would talked some strong there to management impacted business you an some detail on may Specifically strong want new strong dietary the you gains, in provide I bit driving rate year Is performance slow think Ben, issues to year to any currently. Thanks. really business. more light trends the led or

Ben Wolin

obviously, here. software drive weeks lot with ended to Why when I couple and that pull consumers of I a utilization. or our to well of Thanks prescription would of those January, questions. the marketing mean, we don't Yes. really improving Elliot. kind There's can of our the that the you're management, I of into February strong year of trajectory first attribute team. continue both we going piece take levers it On to to integration here execution by just business

one that's end to there's There's point so of execution not the a up And showing across board in to. just numbers. thing lot the

So, year really proud to rest of the see excited really we're that how the and group of goes.

has of you year diets, major product and say, significant especially should very with of half terms suppliers, In year that QX really the I of first year, Last the In or with vendors the the in really outages. right. major our and are struggled QX stabilized. beginning we there

growing at. is now pharmacy on pace or quarters above you're that looking for with time first commercial So the in the depending many diet period time on

suppliers there. challenges much you're the if the of not and a progress for us stable a appropriately, good of consumer gotten diet. more a about it's lot sure if that has gotten prescription manage So and the aware you're better. are consumers of our But those it ability yet to using quite you're feeling would point out products, I woods these out I'm

highlights. near management of that's So term Rx that kind

I tell brands, products the attractions. about you or proprietary markets that's coming quite it's new new would yet, of terms not that In in

I same focus John lot in concept business. sales of here all helping drive and that and growth proprietary it's the now, had and about aligned value the of the sales around brands. combined the globe. execution that's proprietary done to For focusing brands mean, force asked what's really we've It's about incentives the about drive on how And creators customers. the just a can get across

França. we in So we're the quarters things excited about to under the And to on excited about César brands expect really leadership great new come. our proprietary there, opportunity see

Operator

open. Balaji Sir, line question next Your Barclay. Prasad from on is line of the comes

Balaji Prasad

Thank good a couple side. evening. my just from you. Probably Hi,

this. I would your a configured Xx on Pulse, Especially commentary greater fully revenue practice. around granularity like Covetrus have in estimating to Firstly around from a increase

it President years this understand help So currently do for is five have curve. and business reach option KPIs drive out? segment to the you your the or kind size over look for think customer three you years? of And revenues, can that an contribution How to of will curve is response. for a of is I proprietary the three that Thanks. does it adoption how what And to extension what this five regard next a secondly, years. the around previous me the incoming the like the and kind to play what brand With

Ben Wolin

Balaji. Yes.

of So around and we're of in -- a in thousand all, operating from to XX kind system. Pulse, by What visibility technology no all different one lots have that obviously customers are complete so the that sold we bundled is the feat. solution is of together be have more la to increase execute carte the basis of being there. that in ability first all really confidence X,XXX to utilization point beta of used QX the revenue veterinary end a scale in that sure businesses in to services or small of -- of a I'm now the customers terms thrilled other getting our of than drives

in features record, you think medical communications be to beyond integrated about are those client payments couldn't management what things and you appointment you other if electronic that and the have So, used choose.

it, might, might choose choose you it. might not You you

when compelling an economic for we an well allow drives revenue from in adopt choice. pretty significant offering that ease-of-use is just standpoint Now veterinary to the as as still But operating standpoint they that step see customer that that's us up what system. so for the

So the excited that call an on get that give to about on and excited update you we on guys in are with where back be and you we'll qX front.

proprietary distribution and obviously customers, coming business we it's but we where In access terms is it flows billion other our of through to just under flows brands, predominantly that from our $X.X business and channels own have through channels.

end-to-end the the introduction In and and portfolio sales terms profitability quarters. product building overall and have. that launches product And coming category new about that going about really of velocity, margin months KPIs be then, the we on over on it's portfolio to we're it's

on increasingly but So think communicate I that Covetrus. something here focus going to are we at days out and against early

Balaji Prasad

That's helpful. Thank you.

Operator

of Stanley. from Erin the question Wright Morgan from line Next

open. Your line is

Erin Wright

management given out your How of talking that taking account the And does front imply Great. I corporate guidance changes increasingly player you sort just this corporate target interest and about follow-ups. some since in is area, you both the for across then U.S. prescription And of uptake of mean, there? other focus Is Thanks accounts? we're of of internationally? guess, prescription it has the that an with the accounts? on been corporate the as you could that management could in relationships terms any well, in I conflicts of my an for maybe offering -- area

Ben Wolin

Yes. guidance our account corporate change in not imply relationships. does any The

those see opportunity. a I good in We place. are continued think

you into and would One hospitals. local deployed veterinarians basic controls of I know, all models. a kind management own there's the control. two split And are there's federations as Erin, local two provider gets across their where and decisions. -- decision corporate prescription there's They make that of one tight the then As where making much not there's accounts the for centralized tight

the just hope all superior that good build we any given in coming feel market feedback in standpoint have shows workflow changes limitation the hard. is market it position and to is in our and what premier the busy making in how solution are about just market indications think our our a the are we years. I up have and are customers solution it from the that a But only numbers. The on

Erin Wright

Okay, great. Thank you.

Operator

further remarks. this Speakers There time. may closing questions are you no at continue for

Ben Wolin

remarks have at time. We no this closing

Operator

Thank you This Thank conference for call. everyone. you participating. all concludes today's

now You disconnect. may

Covetrus (CVET) 25 Feb 222021 Q4 Earnings call transcript