PetIQ, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the PetIQ first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask your questions. To ask a question, please press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Katie Turner, Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us on PetIQ's first quarter 2024 earnings conference call and webcast. Gord Christensen, Chief Executive Officer, and Dee Glassman, Chief Financial Officer, will review today's prepared remarks. Before I begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the company's annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and the company's press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note on today's call... Management will refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for definitions and a reconciliation of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. In addition, PetIT has posted a supplemental presentation on its website for reference. And with that, I'd like to turn the call over to Cord Christensen.

Thank you, Katie, and good afternoon, everyone. We appreciate you joining us today to discuss our Q1 financial results. I'll begin with an overview of key highlights, then Zee will review our quarterly financials and 2024 outlook. Finally, Zee, Michael, John, and I will be available to answer your questions. We are pleased with our start to 2024. We had a record Q1 with consolidated net sales of $308.4 million at the high end of our guidance. The consistent growth of our product segment fueled our financial results. The strength of Pedicure's brand in Q1 led to favorable leverage of our costs with gross margin expanding 280 basis points to 24.2%. This helped offset higher SG&A expense when compared to Q1 last year, resulting in record profitability. Our net income of 14.9 million, or EPS of 48 cents, increased 47.8% from Q1 last year. And Q1 2024 adjusted EBITDA increased 15% year-over-year to 35.3 million, exceeding our guidance of 31 million to 33 million. This resulted in the highest adjusted EBITDA margin in the company's history of 11.4%, an increase of 80 basis points from Q1 of last year. Based on these strong year-to-date results, we are pleased to raise our guidance for 2024 net sales, adjusted EBITDA, and free cash flow. Focusing on our product segment in more detail, for Q1 of 2024, the product segment contributed net sales of 276.9 million, an increase of approximately 7% compared to the prior year period. The growth in Q1 of this year was broad-based across all product categories. As we've discussed with you the last few quarters, when you look at all the sales channels combined for 2023, it was one of the strongest seasons in the last 10 years for the OTC flea and tick category. We are lapping that record season in 2024, and yet we continue to generate impressive growth from Pedigree's brands, which were up 14.3% compared to the first quarter last year. This growth rate exceeded our expectations for the quarter. Our in-house sales and marketing teams are building significant brands in the pet categories that are growing both online and at brick and mortar retail, while capturing a disproportionate amount of market share. In Q1, we spent an incremental $4.7 million on enhanced advertising and promotional efforts in line with our planned step-up in marketing for 2024. This step-up is included in our Q1 2024 adjusted EBITDA. For Q2, we expect to spend $6 million more in brand building and marketing initiatives than we did in Q2 last year. We are continuing to lean into investments and initiatives that we expect to support the long-term success of our brands. I'd now like to focus on a few of our key category consumption highlights for the first quarter. In the first quarter of 2024, the OTC flea and tick category grew 6.2% and PetIQ's brands increased 10.6%. PetIQ's flea and tick brands gained share across all channels and at each of our top 10 customers while continuing to capture a disproportionate amount of the growth online and dramatically outperforming the broader category as evidenced by our market share results. For the 12 weeks ended March 23, 2024, PetIQ's OTC flea and tick brands captured 15.8% of the category dollars, which is an increase of 63 basis points versus the prior year period. The pet supplement category in total maintained its growth trajectory in the quarter, gaining 14.8% over the prior year period. This fast growing category has nearly tripled in market size over the last five years and is now the largest category within the OTC animal health market. Our pet supplement brands continue to see accelerated consumption and growth. In the first quarter of 2024, where offerings in the space grew 51.2% compared to the prior year period. This growth is driven by our Vet IQ brand, along with the successful launch of Rocco and Roxy into the premium segment of the category. Strong household penetration trends along with expanded need space in the pet supplement category give us confidence that these double-digit growth rates should continue for many years to come, and PetIT is positioned very well to continue to gain share in this market. In addition, our pet dental and treat offerings also outperformed the category in Q1. The Minty's and PureLove brands both grew at three times the total category, leading to significant share gains. The Minty's brand grew 48% and gave 89 basis points of share in the dental tree category. The Pure Love Tree brand also continues to gain momentum as it posted outstanding growth of 65% in Q1 versus a year ago. The newest brand in our product portfolio, Rocco and Roxy, grew 23.4% from the first quarter of 2024. This growth was driven by our launch into the supplement category, and the core stain and odor offerings also saw healthy growth and grew share within the market. Shifting to the services segment, we had a slight net sales increase of 0.2% to 31.6 million compared to Q1 last year. We ran more mobile community clinics across the country than a year ago and increased our pet counts to grow our services segment net sales and essentially offset the lost sales from the 149 wellness centers we closed in the second half of 2023. Our services team continues to do an excellent job managing our contract vet labor to offer pet parents convenient and affordable pet health and wellness options. We are also pleased with the significant operational improvements we achieved in Q1 of this year, which led to gross margin expansion of 810 basis points for the services segment. That completes my Q1 highlights. Before I turn it over to Zvi, I would like to thank our team across the country for their commitment to our mission of providing smarter pet healthcare and their continued support of PetIT's core values. I'd like to now turn the call over to Zvi.