Just for a change of pace, I'll start off this Take by leading with my basic conclusion on VCAAntech (NASDAQ:WOOF). If you liked this provider of veterinary care and services before, there was nothing in the quarter that is going to change your mind. Likewise, if you didn't already have a thing for this company, there's probably nothing in the quarter that's likely to change your mind.
Results for the quarter were solid and basically in line with the sort of performance I would have expected. Total revenue was up 22% (18% if you strip out the impact of the Sound Technologies acquisition), as the lab operations grew a bit more than 12% and the hospital business grew about 22%. Operating margin softened a bit (although it's still quite appealing), and operating income grew 19% for the quarter.
This is a company that has built itself largely through acquisition, and that practice does not appear to be coming to an end. At the beginning of July, the company acquired Pet's Choice, an operator of 46 animal hospitals with annual revenue of about $69 million.
Operating margin in the lab business continued to improve. On the hospital side, the company saw same-store sales growth of 6.4% -- a figure that's a bit lower than the prior two quarters but still very solid in its own right.
Even with the solid performance of this quarter, I still have a few concerns about the company. Volume growth hasn't been especially strong, although the company has been able to offset this with higher-priced (and higher-margin) services. What's more, the company has long carried a high level of debt, and that's still as true today.
Finally, I've done some anecdotal poking around, the results of which haven't been as positive as I'd have liked. Chatting with my veterinarian and other vets online (when you own ferrets, you get to know a lot of vets), I'm not hearing a lot of great feedback on VCA Antech.
In particular, some of the vets related stories of how unhappy colleagues had persuaded them not to sell their practices to the company.
Now, I want to emphasize that this sort of feedback, with a sample size of less than two dozen, is purely anecdotal. So it's far from any kind of scientific or statistically significant information. But it's out there, and it's something that owners of the stock should be aware of and keep in the back of their minds. After all, if you want to build a business through acquisition, you need willing sellers.
As I said in the opening, there wasn't much in this quarter's release to make investors change their mind about this company. It seems to be a solid company within a promising market, although not a company without some risks and potential issues. Those who like the company should stick with the stock, and those who don't should probably still look elsewhere for ideas.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
