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March 4, 2020

Covetrus reports $37M Q4 loss, promotes acting CEO

File Photo / William Hall Covetrus, whose Portland headquarters are shown here, on Tuesday reported a loss of $1 billion for 2019.
By Renee Cordes

Covetrus Inc. (Nasdaq: CVET), the Portland-based provider of animal-health products and services, on Tuesday reported a fourth-quarter net loss of $37 million and announced Benjamin Wolin as its new president and CEO.

In late morning trading Wednesday, shares were up 14%, trading at $12.69. That gives the stock an equity value of around $14.1 billion.

Wolin will transition from the acting role he has held since October when he replaced CEO Benjamin Shaw.

Portrait of Ben Wolin, Covetrus president and CEO.
Courtesy / Covetrus
Ben Wolin, president and CEO of Covetrus, said, "As the recovery in our end-market continues, I believe the combination of our strengthened financial profile and organizational health position us well to accelerate growth and create long-term shareholder value."

The company swung to a fourth-quarter loss from a $33 million net profit a year earlier, bringing its full-year net loss to $1 billion. The 2019 figure includes a non-cash goodwill impairment charge of $938 million.

Fourth-quarter net sales rose 12% year-on-year to $1 billion. Full-year net sales were 5% higher at $4 billion.

In its 2020 financial guidance, Covetrus projected net sales of $4.025 billion to $4.125 billion, and a "relatively flat" adjusted EBITDA compared to 2019. Adjusted 2020 EBITDA is expected in the range of $190 million to $195 million.

In Tuesday's earnings call, Wolin said the company would continue to focus on reducing costs along with investing in higher-margin proprietary products and services.

"Reducing our cost to serve and better managing overhead are critical priorities as we look to deliver operational improvement and build momentum into the second half of the year," he said. "And our investments in global sourcing will lay the foundation for margin enhancement and reinvestment in the years ahead."

Covetrus was launched in February 2019 when Vets First Choice, a Portland veterinary pharmacy company, merged with the animal health supplies business of Henry Schein Inc. (Nasdaq: HSIC).

When shares made their debut on the Nasdaq exchange, they traded above $40. Six months later, after the first full quarter of operations, Covetrus reported a $10 million loss and reduced its annual earnings forecast from $250 million to $200 million. Overnight, the stock price nose-dived 40%.

In September, Covetrus Chairman David Shaw resigned from that role, and the company was sued by investors who claimed it made false and misleading statements before going public. The class-action suit by the City of Hollywood (Fla.) Police Officers’ Retirement System alleged that Covetrus overstated its ability to manage inventory and supply chain services, while understating a variety of costs and business threats.

Then came the Oct. 22 resignation of Covetrus President and CEO Benjamin Shaw, who co-founded Vets First Choice in 2010 with his father, David Shaw. At that time, the company named Wolin as acting president and CEO and said it looked forward to working with Benjamin Shaw as a strategic advisor.

Philip A. Laskawy, who chairs the company's board of directors, said that Tuesday's announcement highlights the important progress made under Wolin's leadership.

"The board is confident that he is the right leader to build on this initial momentum and deliver additional value to our employees, customers, manufacturers, partners, and shareholders in the global animal health market," he added.

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