VCA Inc. (NASDAQ:WOOF) Q2 2015 Earnings Conference Call - Final Transcript

Jul 29, 2015 • 09:00 am ET

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VCA Inc. (NASDAQ:WOOF) Q2 2015 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Ladies and gentlemen, good morning. At this time, I'd like to welcome everyone to the VCA Second Quarter 2015 Conference Call and Webcast. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the company's formal remarks. (Operator Instructions) I will repeat these instructions after management completes the prepared remarks. Today's conference call is being recorded.

(Forward-Looking Cautionary Statement) Listeners should be aware that today's discussion includes reference to non-GAAP financial measures which management believes are useful to understanding our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure will be included with our earnings release and posted on our website, at investor.vcaantech.com. Our earnings and guidance releases are available on our website, at investor.vcaantech.com. In addition, an audio file of this conference will be available on our website for a period of three months.

I would now like to turn the call over to Tom Fuller, CFO. Mr. Fuller, you may begin.

Executive
Tom Fuller

Thank you, Bridgette. That was the hardest part of the call, so appreciate that. And thank you, all, for joining us for the early, it is 6:00 AM here in the West Coast, edition of the second quarter 2015 WOOF earnings call. Today I am very excited to say that we announced a great quarter. 27.5 increase in reported diluted earnings per share to $0.65. Adjusted diluted earnings per share adjusted for acquisition related amortization expenses was $0.70 per share, about a 27% increase over $0.55 per share in the prior-year quarter.

27% increase, very nice acceleration off of the 19% increase we've seen in the last three preceding quarters, Q3, Q4 of last year, first quarter 2015, EPS was up roughly 19%, so 27% is a nice increase, which is really at growth rate is a new high pre-recession. After many years we're seeing good growth.

Coming on strong fundamentals, improving economy, consumers clearly is getting better, the competitive landscape in the lab is getting better, but beyond that we're just in a great market. Just lots of demand for pet healthcare, so very mature market. Pet population is growing as Millennials are kind of getting their acts together, forming households and a big part of every household is a pet, so we're seeing growth there as well, so terrific market. We're seeing growth across all of our segments. All five of our business units had increases in operating income and margins, specifically our core Lab and Hospital business which represents 90% of our revenue.

Our internal growth has continued to accelerate on accelerating volumes which is great and we're seeing good margin expansion. In the Lab, specifically, our internal growth was 7.3%, which is a nice improvement off of this 6.1% in the first quarter of 2015 and the 5% growth in the three-quarters of 2014, and that growth was coming on improving volumes and great margin performance, margins up 200 basis points -- adjusted operating margin up 200 basis points in the Lab.

And the