PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading
pet medication and wellness company, today reported financial
results for the three and six months ended June 30, 2019.
Second Quarter 2019 Highlights Compared
to Prior Year Period
- Record second quarter net sales of $220.6 million, an increase
of 29%
- Net income of $5.9 million compared to $5.4 million
- Adjusted net income $15.8 million compared to $10.8
million
- Adjusted EBITDA of $20.8 million compared to $16.1 million, an
increase of 30%
- Cash and cash equivalents of $36.6
million with total liquidity of $106.4 million
- Opened 7 wellness centers for a
total of 41 in operation as of quarter end
- Closed acquisition of Perrigo
Animal Health on July 8, 2019
Cord Christensen, PetIQ’s Chairman and Chief
Executive Officer commented, “We had an exceptional second
quarter. Our record net sales reflect broad-based growth
across sales channels in both our pet products and veterinarian
services segments. PetIQ remains uniquely positioned for
continued growth as pet parents increasingly seek our direct access
to our complementary veterinarian product and service offerings. We
believe our recent acquisition of Perrigo Animal Health further
solidifies our leadership position in the industry as we deliver on
our mission to make pets’ lives better through improved access to
affordable pet health care. Going forward, our combined teams will
continue to execute on our Follow the Pets long-term growth
strategy. Based on the strength of our year-to-date results and our
outlook for the remainder of the year we are very pleased to raise
our 2019 annual guidance.”
Second Quarter 2019 Financial
Results
Net sales increased 29% to $220.6 million for
the second quarter of 2019, compared to $171.1 million for the same
period in the prior year. Product segment net sales were $194.6
million and Services segment revenues were $26.0 million in the
second quarter of 2019. The increase in consolidated net sales
reflects growth in existing retail partners, driven by the increase
in the number of pet parents moving their pet health care needs to
PetIQ’s products and services, the expansion of item counts and
programs at existing customers, as well as growth within the
Services segment.
Gross profit was $34.9 million, an increase of
33%, compared to $26.3 million in the same period last year. Gross
margin for the quarter was 15.8%. Adjusted gross profit was $36.2
million and adjusted gross margin was 16.5% for the second quarter
2019. The GAAP gross margin to adjusted gross margin
difference of 70 basis points is a result of the exclusion of
non-same-store Services segment revenue contribution and related
costs of sales.
Net income was $5.9 million and adjusted net
income was $15.8 million for the second quarter of 2019. Adjusted
net income primarily excludes stock-based compensation expense, tax
expense, fair value adjustment to contingent note, integration
costs, and operating losses associated with the 32 non-comparable
newly opened veterinary wellness centers, one new host partner, and
seven regional offices that have been open less than six trailing
quarters.
Second quarter adjusted EBITDA increased 30% to
$20.8 million, representing an adjusted EBITDA margin of 9.5%,
compared to $16.1 million, representing a 9.4% margin, for the same
period in the prior year. The increase in adjusted EBITDA was
a result of higher net sales resulting in increased adjusted gross
profit and increased leverage of general and administrative
expenses.
Adjusted gross profit, adjusted net income, and
adjusted EBITDA are non-GAAP financial measures. The Company
believes these non-GAAP financial measures provide investors with
additional insight into and measurement of its entry into the
veterinary services business following the acquisition of VIP in
January 2018. In the Services segment, the Company is
providing a “same-store sales” adjustment to reflect revenue and
costs for veterinary clinics and regions open for at least six
trailing quarters. The Company believes this will provide
useful information to investors as these veterinary clinics and
wellness centers mature and move into the comparable store
base. See “Non-GAAP Measures” for a definition of these
measures and the financial tables that accompany this release for a
reconciliation to the most comparable GAAP measure.
First Half of Fiscal 2019 Highlights
Compared to Prior Year Period
- Net sales of $369.1 million, an increase of 29%
- Net income of $8.2 million compared to $1.4 million
- Adjusted net income of $21.8 million compared to $12.2
million
- Adjusted EBITDA of $31.7 million compared to $21.7 million, an
increase of 46%
Net sales increased 29% to $369.1 million for
the first six months of 2019, compared to $286.2 million for the
same period in the prior year. Product segment sales were $320.7
million and the Services segment net revenues were $48.4 million
for the first six months of 2019.
Gross profit was $59.6 million, an increase of
41%, as compared to $42.2 million in the same period last year.
Gross margin for the first six months of 2019 was 16.2%. Adjusted
gross profit was $62.3 million and adjusted gross margin was 16.9%
for the six months ended June 30, 2019. The GAAP gross margin
to adjusted gross margin difference of 70 basis points was the
result of a result of the exclusion of non-same-store Services
segment revenue contribution and related costs of sales.
Net income was $8.2 million and adjusted net
income was $21.8 million for the first six months of 2019. Adjusted
net income excludes acquisition costs, stock-based compensation
expense, tax expense, fair value adjustment to contingent note,
integration costs, and operating losses associated with the 32
non-comparable newly opened veterinary wellness centers, one new
host partner, and seven regional offices that have been open less
than six trailing quarters.
For the first six months of 2019 adjusted EBITDA
was $31.7 million, compared to $21.7 million for the same period in
the prior year.
Adjusted gross profit, adjusted net income, and
adjusted EBITDA are Non-GAAP financial measures. See
“Non-GAAP Measures” for a definition of these measures and the
financial tables that accompany this release for a reconciliation
to the most comparable GAAP measure.
Segment Results
Products: For the second quarter of 2019, the
Product segment net sales increased 31% to $194.6 million and
operating income increased 25.2% to $20.2 million. This
compares to Product segment sales and operating income of $148.7
million and $16.2 million, respectively, for the second quarter of
2018. Product segment net sales were driven by ongoing
strength of the Company’s prescription drug programs within retail
partner pharmacies both in-store and online, as well as greater SKU
penetration within existing accounts.
Services: For the second quarter of 2019, the
Services segment net revenues and operating income were $26.0
million and $4.4 million, respectively. This compares to
Service segment net revenues and operating income of $22.4 million
and $2.0 million, respectively, for the second quarter of 2018.
Services segment growth was achieved from increases in all
substantive metrics including pets per clinic, revenue per pet and
revenue per clinic, as well as contribution from new wellness
centers.
In-line with PetIQ’s new veterinarian wellness
centers opening plan for 2019, the Company opened 7 locations
during the second quarter of 2019 and remains on track to open 80
new wellness centers in 2019. There were a total of 41
veterinarian wellness centers as of June 30, 2019. In
preparation for its veterinarian wellness center expansion, the
Company opened two new regional offices during the six months ended
June 30, 2019 for a total of 36 regional offices at June 30,
2019.
Cash and Debt
As of June 30, 2019, the Company had cash and
cash equivalents of $36.6 million, plus availability on its
revolving credit facility of $69.9 million, equating to $106.4
million, which the Company defines as total liquidity. The
Company’s long-term debt balance, which is largely comprised of its
revolving credit facility and term loan, was $99.7 million as of
June 30, 2019. After giving effect to the Perrigo Animal
Health acquisition, the Company would have had estimated net debt
of $262 million, as of June 30, 2019. From a working capital
perspective, accounts receivable increased $40.1 million compared
to December 31, 2018, in line with the Company’s strong sales
growth. Inventory increased $6.3 million compared to the prior year
end as a result of inventory needed to support the growth in the
Company’s business.
Perrigo Animal Health
Acquisition
On July 8, 2019, the Company completed the
acquisition of Perrigo Animal Health for total consideration of
$185 million. The transaction was financed through a
combination of $25 million of existing cash on hand, $145 million
of new term loan financing from Ares Capital Management, with the
remaining balance financed through PetIQ’s existing revolving
credit facility with East West Bank. PetIQ continues to expect that
this acquisition will be accretive to earnings in the first twelve
months following the closing and thereafter. PetIQ is committed to
reducing its balance sheet leverage.
Outlook
For the full year 2019, the Company is raising
its net sales and adjusted EBITDA outlook compared to previously
issued guidance.
On a standalone basis, excluding contribution
from its Perrigo Animal Health acquisition, the Company expects the
following:
- Consolidated net sales of at least
$650 million, an increase greater than 23% from growth of 98% in
2018
- Adjusted EBITDA* of at least $56
million, an increase greater than 35% from growth of 86% in
2018
The Company expects its Perrigo Animal Health
acquisition to contribute the following for the balance of
2019:
- Consolidated net sales of at least
$30 million
- Adjusted EBITDA* of at least $6
million
For full year 2019 based on the combination of
PetIQ and Perrigo Animal Health the Company is introducing the
following outlook:
- Consolidated net sales of at least $680 million
- Adjusted EBITDA* of at least $62 million
The Company intends to update its initial full
year 2020 outlook, which was provided in connection with the
announcement of the Perrigo Animal Health acquisition, at the end
of 2019. The Company remains confident in its long-term 2023
growth objectives on a stand-alone basis, including:
- Net sales of approximately $1.0 billion
- Adjusted EBITDA margin of greater than 15%*
- Wellness center locations of 1,000
*The Company does not provide guidance for the
most directly comparable GAAP measure, net income, and similarly
cannot provide a reconciliation between its forecasted adjusted
EBITDA and net income metrics without unreasonable effort due to
the unavailability of reliable estimates for certain items. These
items are not within the Company’s control and may vary greatly
between periods and could significantly impact future financial
results.
Conference Call and Webcast
The Company will host a conference call and
webcast where members of the executive management team will discuss
these results with additional comments and details today, August 7,
2019, at 4:30 p.m. ET. The conference call and supplemental
investor presentation will be available live over the Internet
through the “Investors” section of the Company’s website at
www.PetIQ.com. To participate on the live call listeners in North
America may dial 877-451-6152 and international listeners may dial
201-389-0879.
A replay of the conference call will be archived
on the Company’s website and telephonic playback will be available
through August 28, 2019. North American listeners may dial
844-512-2921 and international listeners may dial 412-317-6671 the
passcode is 13692459.
About PetIQ
PetIQ is a leading, rapidly growing pet health
and wellness company. Through over 60,000 points of
distribution across retail and e-commerce channels, PetIQ has a
mission to make pet lives better by educating pet parents on the
importance of offering regular, convenient access and affordable
choices for pet preventive and wellness veterinary products and
services. PetIQ believes that pets are an important part of
the family and deserve the best products and care we can give
them. For more information, visit www.PetIQ.com.
Forward Looking Statements
This press release contains forward-looking
statements that involve risks and uncertainties, such as statements
about our plans, objectives, expectations, assumptions or future
events. In some cases, you can identify forward-looking statements
by terminology such as "anticipate," "estimate," "plan," "project,"
"continuing," "ongoing," "expect," "believe," "intend," "may,"
"will," "should," "could" and similar expressions.
Forward-looking statements involve estimates, assumptions, known
and unknown risks, uncertainties and other factors that could cause
actual results to differ materially from any future results,
performances, or achievements expressed or implied by the
forward-looking statements. Forward-looking statements should not
be read as a guarantee of future performance or results, and will
not necessarily be accurate indications of the times at, or by,
which such performance or results will be achieved. Forward-looking
statements are based on information available at the time those
statements are made or management's good faith belief as of that
time with respect to future events, and are subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in or suggested by the
forward-looking statements. Important factors that could cause such
differences include, but are not limited to, our ability to
successfully grow our business through acquisitions; our dependency
on a limited number of customers; our ability to implement our
growth strategy effectively; disruptions in our manufacturing and
distribution chains; competition from veterinarians and others in
our industry; reputational damage to our brands; economic trends
and spending on pets; the effectiveness of our marketing and trade
promotion programs; recalls or withdrawals of our products or
product liability claims; our ability to manage our manufacturing
and supply chain effectively; disruptions in our manufacturing and
distribution chains; our ability to introduce new products and
improve existing products; our failure to protect our intellectual
property; costs associated with governmental regulation; our
ability to keep and retain key employees; our ability to sustain
profitability; and the risks set forth under the “Risk Factors” of
our Annual Report on Form 10-K for the year ended December 31, 2018
and other reports filed time to time with the Securities and
Exchange Commission.
Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition or
operating results. The forward-looking statements speak only
as of the date on which they are made, and, except as required by
law, we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of
unanticipated events. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
Consequently, you should not place undue reliance on
forward-looking statements.
Non-GAAP Financial Measures
In addition to financial results reported in
accordance with U.S. GAAP, PetIQ uses the following non-GAAP
financial measures: Adjusted net income, Adjusted gross profit,
Adjusted EBITDA, and Adjusted EBITDA Margin.
Adjusted net income consists of net income
adjusted for tax expense, acquisition expenses, purchase accounting
adjustments, integration costs and costs of discontinued clinics,
new clinic launch expense, and stock based compensation
expense. Adjusted net Income is utilized by management: (i)
to compare operations of the Company prior to our initial public
offering and (ii) to evaluate the effectiveness of our business
strategies.
Adjusted gross profit consists of gross profit
adjusted for purchase accounting adjustments, gross profit (loss)
on veterinarian clinics and wellness centers that are not part of
same store sales, and new clinic launch expense. Adjusted
gross profit is utilized by management to evaluate the
effectiveness of our business strategies.
EBITDA represents net income before interest,
income taxes, and depreciation and amortization. Adjusted EBITDA
represents EBITDA plus acquisition costs, stock based compensation
expense, purchase accounting inventory adjustment, fair value
adjustment to contingent consideration, new clinic launch expenses,
integration and costs of discontinued clinics, and operations of
non-same-store operations as defined below. Adjusted EBITDA margin
is adjusted EBITDA stated as a percentage of adjusted net
sales. Adjusted EBITDA is utilized by management: (i) as a
factor in evaluating management's performance when determining
incentive compensation and (ii) to evaluate the effectiveness of
our business strategies. The Company presents EBITDA because
it is a necessary component for computing adjusted EBITDA.
We believe that the use of adjusted net income,
adjusted gross profit, adjusted EBITDA, and adjusted EBITDA margin
provide additional tools for investors to use in evaluating ongoing
operating results and trends. In addition, you should be aware when
evaluating adjusted net income, adjusted gross profit, adjusted
EBITDA and adjusted EBITDA margin, that in the future we may incur
expenses similar to those excluded when calculating these measures.
Our presentation of these measures should not be construed as an
inference that our future results will be unaffected by these or
other unusual or non-recurring items. Our computation of adjusted
net income, adjusted gross profit, adjusted EBITDA and adjusted
EBITDA margin may not be comparable to other similarly titled
measures computed by other companies, because all companies do not
calculate adjusted net income, adjusted gross profit, adjusted
EBITDA and adjusted EBITDA margin in the same manner. Our
management does not, and you should not, consider adjusted net
income, adjusted gross profit or adjusted EBITDA in isolation or as
an alternative to financial measures determined in accordance with
GAAP. The principal limitation of adjusted net income, adjusted
gross profit and adjusted EBITDA is that they exclude significant
expenses and income that are required by GAAP to be recorded in our
financial statements. See a reconciliation of Non-GAAP
measures to the most comparable GAAP measure, in the financial
tables that accompany this release.
The Company considers its same-store portfolio
to consist of only those retail service regional offices, mobile
community clinics provided within host partners, and wellness
centers that have been operating for at least six trailing
quarters.
Definitions
- Mobile community clinic – A mobile community clinic is defined
as an event, or a visit to a retail host partner location, by the
Company’s veterinary staff utilizing the Company’s mobile service
vehicles. Clinic locations and schedules vary by location and
seasonally. Due to the non-standardization of the Company’s mobile
community clinics, these clinics are grouped as part of geographic
regions. New regions and host partners are excluded from the
same store sale calculation until they have six full consecutive
quarters of operations.
- Veterinarian Wellness center – A veterinarian wellness center
is a physical fixed service location within the existing footprint
of one of our retail partners. These veterinarian wellness
centers operate under a variety of brands based on the needs of our
partner locations.
- Regional offices – Regional offices support the operations of
the Company’s services segment which include its mobile
veterinarian community clinics and wellness centers. These
offices are staffed with field management and other operational
staff.
CONTACT:
Investor Relations Contact: |
Media Relations Contact: |
ICRJeff Sonnek646-277-1263
jeff.sonnek@icrinc.com |
ICRCory
Ziskind646-277-1232cory.ziskind@icrinc.com |
PetIQ, Inc.Condensed Consolidated Balance
Sheets(Unaudited, in 000’s except for per share
amounts) |
|
|
|
|
|
|
|
June 30, 2019 |
|
December 31, 2018 |
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
36,564 |
|
|
$ |
66,360 |
|
|
Accounts receivable, net |
|
|
85,129 |
|
|
|
45,007 |
|
|
Inventories |
|
|
98,433 |
|
|
|
92,142 |
|
|
Other current assets |
|
|
2,874 |
|
|
|
4,212 |
|
|
Total current assets |
|
|
223,000 |
|
|
|
207,721 |
|
|
Property, plant and equipment, net |
|
|
26,303 |
|
|
|
27,335 |
|
|
Operating lease right of use assets |
|
|
11,990 |
|
|
|
— |
|
|
Deferred tax assets |
|
|
48,620 |
|
|
|
43,946 |
|
|
Other non-current assets |
|
|
2,896 |
|
|
|
2,857 |
|
|
Intangible assets, net |
|
|
85,995 |
|
|
|
88,546 |
|
|
Goodwill |
|
|
125,040 |
|
|
|
125,029 |
|
|
Total assets |
|
$ |
523,844 |
|
|
$ |
495,434 |
|
|
Liabilities and equity |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
61,234 |
|
|
$ |
54,768 |
|
|
Accrued wages payable |
|
|
6,725 |
|
|
|
5,295 |
|
|
Accrued interest payable |
|
|
547 |
|
|
|
728 |
|
|
Other accrued expenses |
|
|
877 |
|
|
|
1,154 |
|
|
Current portion of operating leases |
|
|
3,306 |
|
|
|
— |
|
|
Current portion of long-term debt and finance leases |
|
|
2,338 |
|
|
|
2,251 |
|
|
Total current liabilities |
|
|
75,027 |
|
|
|
64,196 |
|
|
Operating leases, less current installments |
|
|
8,895 |
|
|
|
— |
|
|
Long-term debt, less current installments |
|
|
99,723 |
|
|
|
107,418 |
|
|
Finance leases, less current installments |
|
|
1,768 |
|
|
|
2,319 |
|
|
Other non-current liabilities |
|
|
254 |
|
|
|
524 |
|
|
Total non-current liabilities |
|
|
110,640 |
|
|
|
110,261 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
282,343 |
|
|
|
262,219 |
|
|
Class A common stock, par value $0.001 per share, 125,000 shares
authorized; 22,750 and 21,620 shares issued and outstanding,
respectively |
|
|
22 |
|
|
|
22 |
|
|
Class B common stock, par value $0.001 per share, 100,000 shares
authorized; 5,462 and 6,547 shares issued and outstanding,
respectively |
|
|
7 |
|
|
|
7 |
|
|
Retained Earnings (Accumulated deficit) |
|
|
976 |
|
|
|
(4,450 |
) |
|
Accumulated other comprehensive loss |
|
|
(1,327 |
) |
|
|
(1,316 |
) |
|
Total stockholders' equity |
|
|
282,020 |
|
|
|
256,481 |
|
|
Non-controlling interest |
|
|
56,157 |
|
|
|
64,496 |
|
|
Total equity |
|
|
338,177 |
|
|
|
320,977 |
|
|
Total liabilities and equity |
|
$ |
523,844 |
|
|
$ |
495,434 |
|
|
PetIQ, Inc.Condensed Consolidated
Statements of Income (Unaudited, in 000’s,
except for per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
194,606 |
|
|
$ |
148,713 |
|
|
$ |
320,690 |
|
|
$ |
246,564 |
|
Services revenue |
|
|
26,028 |
|
|
|
22,429 |
|
|
|
48,380 |
|
|
|
39,644 |
|
Total net sales |
|
|
220,634 |
|
|
|
171,142 |
|
|
|
369,069 |
|
|
|
286,208 |
|
Cost of products sold |
|
|
167,845 |
|
|
|
127,583 |
|
|
|
275,909 |
|
|
|
212,169 |
|
Cost of services |
|
|
17,889 |
|
|
|
17,241 |
|
|
|
33,531 |
|
|
|
31,838 |
|
Total cost of
sales |
|
|
185,733 |
|
|
|
144,824 |
|
|
|
309,439 |
|
|
|
244,007 |
|
Gross profit |
|
|
34,901 |
|
|
|
26,318 |
|
|
|
59,630 |
|
|
|
42,201 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
24,450 |
|
|
|
16,943 |
|
|
|
44,988 |
|
|
|
35,911 |
|
Contingent note revaluations loss |
|
|
1,460 |
|
|
|
459 |
|
|
|
780 |
|
|
|
600 |
|
Operating income |
|
|
8,991 |
|
|
|
8,916 |
|
|
|
13,862 |
|
|
|
5,690 |
|
Interest expense, net |
|
|
(2,242 |
) |
|
|
(2,216 |
) |
|
|
(4,179 |
) |
|
|
(3,981 |
) |
Foreign currency gain (loss), net |
|
|
49 |
|
|
|
136 |
|
|
|
(73 |
) |
|
|
58 |
|
Other income (expense), net |
|
|
2 |
|
|
|
(418 |
) |
|
|
15 |
|
|
|
(373 |
) |
Total other expense, net |
|
|
(2,191 |
) |
|
|
(2,498 |
) |
|
|
(4,237 |
) |
|
|
(4,296 |
) |
Pretax
net income |
|
|
6,800 |
|
|
|
6,418 |
|
|
|
9,625 |
|
|
|
1,394 |
|
Income
tax (expense) benefit |
|
|
(881 |
) |
|
|
(1,020 |
) |
|
|
(1,381 |
) |
|
|
47 |
|
Net income |
|
|
5,919 |
|
|
|
5,398 |
|
|
|
8,244 |
|
|
|
1,441 |
|
Net
income attributable to non-controlling interest |
|
|
2,103 |
|
|
|
2,899 |
|
|
|
2,818 |
|
|
|
970 |
|
Net
income attributable to PetIQ, Inc. |
|
$ |
3,815 |
|
|
$ |
2,499 |
|
|
$ |
5,426 |
|
|
$ |
471 |
|
Net income per share
attributable to PetIQ, Inc. Class A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.17 |
|
|
$ |
0.16 |
|
|
$ |
0.25 |
|
|
$ |
0.03 |
|
Diluted |
|
$ |
0.17 |
|
|
$ |
0.16 |
|
|
$ |
0.24 |
|
|
$ |
0.03 |
|
Weighted Average
shares of Class A common stock outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
22,365 |
|
|
|
15,980 |
|
|
|
22,087 |
|
|
|
15,285 |
|
Diluted |
|
|
22,597 |
|
|
|
16,008 |
|
|
|
22,284 |
|
|
|
15,329 |
|
PetIQ, Inc.Condensed Consolidated
Statements of Cash Flows(Unaudited, in
000’s) |
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Cash flows from operating activities |
|
|
|
|
|
|
Net income |
|
$ |
8,244 |
|
|
$ |
1,441 |
|
Adjustments to reconcile net income to net cash used in operating
activities |
|
|
|
|
|
|
Depreciation and amortization of intangible assets and loan
fees |
|
|
6,056 |
|
|
|
5,714 |
|
Foreign exchange gain on liabilities |
|
|
— |
|
|
|
(41 |
) |
Gain on disposition of property, plant, and equipment |
|
|
(62 |
) |
|
|
(49 |
) |
Stock based compensation expense |
|
|
3,146 |
|
|
|
1,454 |
|
Deferred tax adjustment |
|
|
1,638 |
|
|
|
(47 |
) |
Contingent note revaluations |
|
|
780 |
|
|
|
600 |
|
Other non-cash activity |
|
|
56 |
|
|
|
(334 |
) |
Changes in assets and liabilities |
|
|
|
|
|
|
Accounts receivable |
|
|
(40,218 |
) |
|
|
(20,820 |
) |
Inventories |
|
|
(6,294 |
) |
|
|
(29,384 |
) |
Other assets |
|
|
1,250 |
|
|
|
2,654 |
|
Accounts payable |
|
|
6,656 |
|
|
|
31,859 |
|
Accrued wages payable |
|
|
1,407 |
|
|
|
410 |
|
Other accrued expenses |
|
|
(717 |
) |
|
|
(2,304 |
) |
Net cash used in
operating activities |
|
|
(18,058 |
) |
|
|
(8,847 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
Proceeds from disposition of property, plant, and equipment |
|
|
69 |
|
|
|
103 |
|
Purchase of property, plant, and equipment |
|
|
(1,730 |
) |
|
|
(4,732 |
) |
Business acquisitions (net of cash acquired) |
|
|
— |
|
|
|
(92,083 |
) |
Net cash used in
investing activities |
|
|
(1,661 |
) |
|
|
(96,712 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
323,144 |
|
|
|
299,078 |
|
Principal payments on long-term debt |
|
|
(331,856 |
) |
|
|
(215,964 |
) |
Tax Distributions to LLC Owners |
|
|
(1,378 |
) |
|
|
(574 |
) |
Principal payments on finance lease obligations |
|
|
(737 |
) |
|
|
(561 |
) |
Payment of deferred financing fees and debt discount |
|
|
(50 |
) |
|
|
(2,613 |
) |
Exercise of options to purchase common stock |
|
|
798 |
|
|
|
— |
|
Net cash (used in)
provided by financing activities |
|
|
(10,079 |
) |
|
|
79,366 |
|
Net change in cash and cash equivalents |
|
|
(29,798 |
) |
|
|
(26,193 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
|
2 |
|
|
|
(31 |
) |
Cash and cash
equivalents, beginning of period |
|
|
66,360 |
|
|
|
37,896 |
|
Cash and cash
equivalents, end of period |
|
$ |
36,564 |
|
|
$ |
11,672 |
|
|
|
|
|
|
|
|
PetIQ, Inc.Summary
Segment Results(Unaudited, in 000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2019 |
|
Products |
|
Services |
|
Corporate |
|
Consolidated |
|
Net Sales |
|
$ |
320,690 |
|
$ |
48,380 |
|
$ |
— |
|
|
$ |
369,070 |
|
Operating income (loss) |
|
|
33,316 |
|
|
7,411 |
|
|
(26,864 |
) |
|
|
13,862 |
|
Six months ended
June 30, 2018 |
|
|
|
|
|
|
|
|
-7.3 |
% |
|
|
|
|
Net Sales |
|
|
246,564 |
|
|
39,644 |
|
|
— |
|
|
|
286,208 |
|
Operating income (loss) |
|
|
25,105 |
|
|
1,595 |
|
|
(21,010 |
) |
|
|
5,690 |
|
|
|
|
|
|
|
|
|
|
-7.3 |
% |
|
|
|
|
Three months ended
June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
194,606 |
|
$ |
26,028 |
|
$ |
— |
|
|
$ |
220,634 |
|
Operating income (loss) |
|
|
20,227 |
|
|
4,394 |
|
|
(15,631 |
) |
|
|
8,990 |
|
Three months ended
June 30, 2018 |
|
|
|
|
|
|
|
|
-7.1 |
% |
|
|
|
|
Net Sales |
|
|
148,713 |
|
|
22,429 |
|
|
— |
|
|
|
171,142 |
|
Operating income (loss) |
|
|
16,156 |
|
|
1,951 |
|
|
(9,191 |
) |
|
|
8,916 |
|
PetIQ,
Inc.Reconciliation between gross profit and
adjusted gross profit(Unaudited, in
000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
Gross profit |
|
$ |
34,900 |
|
$ |
26,318 |
|
$ |
59,630 |
|
$ |
42,201 |
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustment to inventory |
|
|
— |
|
|
— |
|
|
— |
|
|
1,502 |
Non same-store gross loss |
|
|
1,255 |
|
|
1,352 |
|
|
2,690 |
|
|
1,519 |
Adjusted gross profit |
|
$ |
36,155 |
|
$ |
27,670 |
|
$ |
62,320 |
|
$ |
45,222 |
PetIQ,
Inc.Reconciliation between Net Income and Adjusted
EBITDA(Unaudited, in 000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
Net income |
|
$ |
5,918 |
|
|
$ |
5,398 |
|
|
$ |
8,244 |
|
|
$ |
1,441 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense (benefit) |
|
|
881 |
|
|
|
1,020 |
|
|
|
1,381 |
|
|
|
(47 |
) |
Depreciation |
|
|
1,529 |
|
|
|
1,780 |
|
|
|
3,183 |
|
|
|
3,030 |
|
Amortization |
|
|
1,278 |
|
|
|
1,257 |
|
|
|
2,557 |
|
|
|
2,397 |
|
Interest |
|
|
2,242 |
|
|
|
2,216 |
|
|
|
4,179 |
|
|
|
3,981 |
|
EBITDA |
|
$ |
11,848 |
|
|
$ |
11,671 |
|
|
$ |
19,544 |
|
|
$ |
10,802 |
|
Acquisition costs(1) |
|
|
2,889 |
|
|
|
151 |
|
|
|
3,465 |
|
|
|
3,366 |
|
Stock based compensation expense |
|
|
1,602 |
|
|
|
756 |
|
|
|
3,146 |
|
|
|
1,454 |
|
Purchase accounting adjustment to inventory |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,502 |
|
Non same-store revenue(2) |
|
|
(2,155 |
) |
|
|
(1,082 |
) |
|
|
(3,671 |
) |
|
|
(1,303 |
) |
Non same-store costs(2) |
|
|
4,044 |
|
|
|
2,434 |
|
|
|
7,296 |
|
|
|
2,822 |
|
Fair value adjustment of contingent note |
|
|
1,460 |
|
|
|
459 |
|
|
|
780 |
|
|
|
600 |
|
Integration costs and costs of discontinued clinics(3) |
|
|
1,142 |
|
|
|
385 |
|
|
|
1,142 |
|
|
|
756 |
|
Clinic launch expenses(4) |
|
|
— |
|
|
|
846 |
|
|
|
— |
|
|
|
1,211 |
|
Non-recurring royalty settlement(5) |
|
|
— |
|
|
|
440 |
|
|
|
— |
|
|
|
440 |
|
Adjusted EBITDA |
|
$ |
20,830 |
|
|
$ |
16,060 |
|
|
$ |
31,702 |
|
|
$ |
21,650 |
|
|
|
|
9.5% |
|
|
|
9.4% |
|
|
|
8.7% |
|
|
|
7.6% |
|
(1)
Acquisition costs relating to various acquisitions, both completed
and contemplated.
(2)
Non same-store revenue and costs are from wellness centers, host
partners, and regions with less than six full trailing quarters of
operating results. There were 32 wellness centers, 7 regions, and
one new host partner that had less than six trailing quarters of
operating results for the three and six months ended
June 30, 2019 23 wellness centers and 5 regions for the
three and six months ended June 30, 2018.
(3)
Integration costs and costs of discontinued clinics represent costs
related to integrating the acquired businesses, such as personnel
costs like severance and signing bonuses, consulting work, brand
realignment and SKU rationalization, and IT conversion costs, in
addition to costs associated with vet services clinics that were
discontinued subsequent to the acquisition of VIP.
(4)
Clinic launch expenses represent the nonrecurring costs to open new
veterinary wellness centers, primarily employee costs, training,
marketing, and rent prior to opening for business.
(5)
Non-recurring royalty settlement represents a settlement paid to a
supplier related to a royalty agreement in place since 2013.
PetIQ,
Inc.Reconciliation between Net Income and Adjusted
Net Income (Unaudited, in 000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
|
Net income |
|
$ |
5,918 |
|
|
$ |
5,398 |
|
|
$ |
8,244 |
|
|
$ |
1,441 |
|
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs(1) |
|
|
2,889 |
|
|
|
151 |
|
|
|
3,465 |
|
|
|
3,366 |
|
|
Tax expense (benefit) |
|
|
881 |
|
|
|
1,020 |
|
|
|
1,381 |
|
|
|
(47 |
) |
|
Stock based compensation expense |
|
|
1,602 |
|
|
|
756 |
|
|
|
3,146 |
|
|
|
1,454 |
|
|
Purchase accounting adjustment to inventory |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,502 |
|
|
Non same-store revenue(2) |
|
|
(2,155 |
) |
|
|
(1,082 |
) |
|
|
(3,671 |
) |
|
|
(1,303 |
) |
|
Non same-store costs(2) |
|
|
4,044 |
|
|
|
2,434 |
|
|
|
7,296 |
|
|
|
2,822 |
|
|
Fair value adjustment of contingent note |
|
|
1,460 |
|
|
|
459 |
|
|
|
780 |
|
|
|
600 |
|
|
Integration costs and costs of discontinued clinics(3) |
|
|
1,142 |
|
|
|
385 |
|
|
|
1,142 |
|
|
|
756 |
|
|
Clinic launch expenses(4) |
|
|
— |
|
|
|
846 |
|
|
|
— |
|
|
|
1,211 |
|
|
Non-recurring royalty settlement(5) |
|
|
— |
|
|
|
440 |
|
|
|
— |
|
|
|
440 |
|
|
Adjusted Net income |
|
$ |
15,781 |
|
|
$ |
10,807 |
|
|
$ |
21,783 |
|
|
$ |
12,242 |
|
|
(1)
Acquisition costs relating to various acquisitions, both completed
and contemplated.
(2)
Non same-store revenue and costs are from wellness centers, host
partners, and regions with less than six full trailing quarters of
operating results. There were 32 wellness centers, 7 regions, and
one new host partner that had less than six trailing quarters of
operating results for the three and six months ended
June 30, 2019 23 wellness centers and 5 regions for the
three and six months ended June 30, 2018.
(3)
Integration costs and costs of discontinued clinics represent costs
related to integrating the acquired businesses, such as personnel
costs like severance and signing bonuses, consulting work, brand
realignment and SKU rationalization, and IT conversion costs, in
addition to costs associated with vet services clinics that were
discontinued subsequent to the acquisition of VIP.
(4)
Clinic launch expenses represent the nonrecurring costs to open new
veterinary wellness centers, primarily employee costs, training,
marketing, and rent prior to opening for business.
(5)
Non-recurring royalty settlement represents a settlement paid to a
supplier related to a royalty agreement in place since
2013.
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