VCA Inc. (NASDAQ:WOOF) Q2 2016 Earnings Conference Call - Final Transcript

Jul 27, 2016 • 09:00 am ET

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VCA Inc. (NASDAQ:WOOF) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to VCA Incorporated Second Quarter 2016 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time (Operator Instructions). As a reminder, this conference may be recorded.

(Forward-Looking Cautionary Statements) Listeners should also be aware that today's discussion includes reference to non-GAAP financial measures, which management believes are useful to an understanding of 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.vca.com.

Our earnings and guidance releases are available on our website at investor.vca.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 introduce your host for today's conference, CFO, Mr. Tom Fuller. Sir, you may begin.

Executive
Tom Fuller

Thank you, Sabrina. Thank you all for joining us for the early edition, 6:00 o'clock here in the West Coast, second quarter 2016 VCA earnings call. I think we had a terrific second quarter. Adjusted diluted earnings per share increased 24.3% to $0.87 a share, seeing good, stable growth. This is our fifth consecutive quarter above 20%. Both our core lab and hospital business continue to do very well, each with comps over 5%, great margin expansion.

Antech Diagnostics' internal growth was 5.5% for the quarter and adjusted operating margins were up 100 basis points. And at the hospitals, same-store growth was 6.3% and the adjusted gross profit margins were up 100 basis points.

On a GAAP basis, $0.78 per share, we did make a couple of adjustments in the quarter. In addition to the standard add-back for amortization related to acquisitions, which amounted to $0.07 for the quarter, we also took a $1.6 million pretax charge for debt retirement costs, which amounted to $0.01 per share after tax. As always, there is tables in the back of the press release to reconcile the non-GAAP measures to the nearest GAAP measure.

On a consolidated basis, with 5% to 6% internal growth and revenue from acquisitions, including CAPNA on May 1, our consolidated revenue increased 19.1%. And with that 19% revenue increase and a 50 basis point increase in operating margins, adjusted operating income increased 22.3%, and as I said, EPS increased 24.3%.

So I think we continue to see strong fundamentals. Industry continues to do very, very well; great demand; economy is improving; strong consumer and I think we're seeing great business with -- based on pets with a lot of natural demands to a pretty immature market.

In addition to the market though, I think the things we're doing internally, we're starting to see some success. Client experience, wellness programs and a lot of great stuff in the technology side with apps, texting and appointment reminders are starting to gain traction.

At Antech Diagnostics, revenue increased 5.5%, all from internal growth. We continue to