PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading
pet medication and wellness company, today reported financial
results for the third quarter and nine months ended September 30,
2019.
Third Quarter 2019 Highlights Compared
to Prior Year Period
- Record third quarter net sales of $186.0 million, an increase
of 42%; excluding contribution from Perrigo Animal Health, net
sales increased 29%
- Net loss of $8.8 million, compared to net income of $3.9
million, including $12.0 million of non-recurring acquisition and
integration related costs in the current period and $0.2 million in
the prior year period
- Adjusted net income $9.3 million compared to $8.2 million, an
increase of 14%
- Adjusted EBITDA of $19.3 million compared to $13.4 million, an
increase of 44%
- Cash and cash equivalents of $10.5 million with total liquidity
of $102.9 million
- On-track to open 80 veterinary wellness centers in 2019: 26
opened year-to-date through October, 34 to open in November,
remaining 20 to open in December
- Completed Perrigo Animal Health acquisition on July 8,
2019
“Our record quarterly net sales demonstrates the
strength of our diversified pet health and wellness business,”
commented Cord Christensen, PetIQ’s Chairman and Chief Executive
Officer. “The Products segment delivered another quarter of
outstanding growth as we benefited from the distribution
relationships we have with our animal health pharmaceutical
partners, an acceleration in our manufactured brands and an
increasing number of pet parents transitioning their pet health
care needs to PetIQ’s affordable and convenient offerings. In
the Services segment, we remain on track with our growth
initiatives and our team continues to execute on our plan to open
80 wellness centers in 2019. We are experiencing an
accelerated ramp to profitability in the pop-up community clinics
that we have converted into permanent wellness centers, which
further reinforces our conviction that the Services segment can
drive sustainable long-term growth.”
Christensen continued, “Since completing the
Perrigo Animal Health acquisition in July, our team has made a
tremendous amount of progress on the integration and we remain
on-track to achieve our stated synergies with continued growth in
this business expected for 2020. PetIQ remains uniquely
positioned through our complementary veterinarian products and
services offering, which is anchored in our mission of providing
Smarter Pet Health as we capitalize on the robust consumer and
animal health industry tailwinds for many years to come.”
Third Quarter 2019 Financial
Results
Net sales increased 42% to $186.0 million for
the third quarter of 2019, compared to $131.4 million for the same
period in the prior year. Excluding contribution from Perrigo
Animal Health, net sales increased 29%. Product segment net sales
were $161.5 million and Services segment revenues were $24.5
million in the third quarter of 2019. The increase in consolidated
net sales primarily reflects growth in existing retail partners and
sales contribution from the recent Perrigo Animal Health
acquisition. The business is being driven by an increase in the
number of pet parents moving their pet health care needs to PetIQ’s
products and services, expanded item placement and marketing
programs at existing customers, as well as a continued increase in
pet count within the Services segment.
Gross profit was $27.3 million, an increase of
13%, compared to $24.2 million in the same period last year. Gross
margin for the quarter was 14.7%. Adjusted gross profit was $39.0
million and adjusted gross margin increased 80 basis points to
21.0% for the third quarter 2019. The GAAP gross margin to
adjusted gross margin difference of 630 basis points is a result of
the exclusion of non-same-store Services segment revenue
contribution and related costs of sales.
Net loss was $8.8 million, including $12.0
million of non-recurring costs related to the acquisition of
Perrigo Animal Health, integration expenses including SKU
rationalization, and an inventory purchase accounting adjustment.
Excluding these non-recurring expenses in the current year and $0.2
million in the prior year period, third quarter pre-tax net income
would have been $3.3 million as compared to $4.1 million in prior
year period. Adjusted net income was $9.3 million for the third
quarter of 2019, compared to $8.2 million in the prior year
period. Additionally, interest expense was $3.6 million
higher in third quarter 2019 versus the prior year due to the
financing of the Perrigo Animal Health acquisition that closed at
the beginning of July. Third quarter 2019 adjusted net income
excludes additional items such as stock-based compensation expense,
tax expense, fair value adjustment to contingent note, clinic
launch expense, and operating losses associated with the 34
veterinary wellness centers, one new host partner, and seven
regional offices that have been open less than six trailing
quarters in our Services segment.
Third quarter adjusted EBITDA increased 44% to
$19.3 million, representing an adjusted EBITDA margin of 10.4%,
compared to $13.4 million, representing a 10.2% 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.
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 the way the CODM views reportable segment
operations in light of changes in the Company’s operations,
including the increase of manufacturing operations as a result of
the Perrigo Animal Health Acquisition in the Products segment and
the growth of the Company’s wellness centers, host partners, and
regions within the Services segment. 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 Nine Months of Fiscal 2019
Highlights Compared to Prior Year Period
- Net sales of $555.1 million, an increase of 33%; excluding
contribution from Perrigo Animal Health, net sales increased
29%
- Net loss of $0.6 million, compared to net income of $5.3
million, including $16.6 million of non-recurring acquisition and
integration related costs in the current period and $5.8 million in
the prior year period
- Adjusted net income of $31.1 million compared to $20.4 million,
an increase of 52%
- Adjusted EBITDA of $51.0 million compared to $35.1 million, an
increase of 45%
Net sales increased 33% to $555.1 million for
the first nine months of 2019, compared to $417.6 million for the
same period in the prior year. Excluding contribution from Perrigo
Animal Health, net sales increased 29%. Product segment sales were
$482.2 million and the Services segment net revenues were $72.9
million for the first nine months of 2019.
Gross profit was $86.9 million, an increase of
30.9%, as compared to $66.4 million in the same period last year.
Gross margin for the first nine months of 2019 was 15.7%. Adjusted
gross profit was $102.2 million and adjusted gross margin increased
120 basis points to 18.4% for the nine months ended September 30,
2019. The GAAP gross margin to adjusted gross margin
difference of 270 basis points was the result of the exclusion of
non-same-store Services segment revenue contribution and related
costs of sales and SKU rationalization and purchase accounting
adjustments related to the Perrigo Animal Health Acquisition.
Year-to-date net loss was $0.6 million and
includes non-recurring acquisition costs of $16.6 million in the
current year and $5.8 million in the prior year period, related to
the Perrigo Animal Health acquisition, HBH and VIP Petcare
acquisitions, such as integration expenses, SKU rationalization
costs and an inventory purchase accounting adjustment. Excluding
these non-recurring expenses in both periods, year-to-date pre-tax
net income would have been $16.1 million as compared to $11.1
million in prior year period. Adjusted net income was $31.1 million
for the first nine months of 2019, an increase of 52% compared to
$20.4 million in the prior year period. Additionally, interest
expense was $3.8 million higher versus the prior year period which
was nearly entirely due to funding of the Perrigo Animal Health
acquisition that closed at the beginning of July. Adjusted net
income excludes acquisition costs, stock-based compensation
expense, tax expense, fair value adjustment to contingent note,
integration costs, SKU rationalization and operating losses
associated with the 34 non-comparable newly opened veterinary
wellness centers, one new host partner, and seven regional offices
that have been open less than six trailing quarters in the Services
segment.
For the first nine months of 2019 adjusted
EBITDA increased 45% to $51.0 million, representing an adjusted
EBITDA margin of 9.3%, compared to $35.1 million, representing an
8.5% margin, 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 third quarter of 2019, the
Product segment net sales increased 49% to $161.5 million and,
excluding contribution from Perrigo Animal Health, Product segment
net sales increased 34%. Product Adjusted EBITDA increased 40% to
$20.5 million. This compares to Product segment sales and
adjusted EBITDA of $108.5 million and $14.6 million, respectively,
for the third quarter of 2018. Year-to-date, Product segment
net sales increased 36% to $482.2 million and Product adjusted
EBITDA increased 36% to $56.0 million. Product segment net sales
and Adjusted EBITDA were driven by ongoing strength of the
Company’s prescription drug programs within retail partner
pharmacies both in-store and online, the acquisition of Perrigo
Animal Health and related operations, as well as greater SKU
penetration within existing accounts.
Services: For the third quarter of 2019,
Services segment net revenues increased 7% to $24.5 million and
Services adjusted EBITDA increased 37% to $7.0 million. This
compares to Services segment net revenues and adjusted EBITDA of
$22.9 million and $5.2 million, respectively, for the third quarter
of 2018. Year-to-date, Services segment net sales increased 17% to
$72.9 million and Services adjusted EBITDA increased 48% to $18.2
million. Services segment growth was achieved from increases in all
substantive metrics including total pets, pets per clinic, revenue
per pet and revenue per clinic, as well as contribution from new
wellness centers.
When excluding the non-same store Wellness
Center revenue, services same store revenue increased by 2% and 12%
for the three and nine months ended September 30, 2019,
respectively. The lower same store growth rate is a result of
planned conversion of high-pet-count weekly Community Clinics into
Wellness Centers. Non-same store revenue increased 75.5% and
125.4% to $2.6 million and $6.3 million for the three and nine
months ended September 30, 2019, respectively. Non-same store
growth is a result of opening additional wellness centers, as well
as wellness centers opened in the prior year maturing, before
moving into the same-store sales base.
The Company remains on track to open 80 Wellness
Centers in 2019. The Company has opened 26 locations year-to-date,
for a total of 67 units in operation. There are 54 locations
currently under construction, or contracted to start construction
with 34 locations opening in November and 20 in December. In
support of its veterinarian wellness center expansion, the Company
operated 36 regional offices as of September 30, 2019.
Balance Sheet
As of September 30, 2019, the Company had cash
and cash equivalents of $10.5 million, plus availability on its
revolving credit facility of $92.1 million, equating to $102.6
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 $254.7 million as of
September 30, 2019. PetIQ is committed to reducing its
balance sheet leverage. From a working capital perspective,
accounts receivable increased $53.8 million compared to December
31, 2018, in line with the Company’s strong sales growth. Inventory
increased $5.8 million compared to the prior year end as a result
the Perrigo Animal Health acquisition, offset by SKU
rationalization and seasonality as September 30, 2019 is nearing a
low point of inventory for the year.
Outlook
For full year 2019, based on the combination of
PetIQ and Perrigo Animal Health, the Company is reiterating the
following outlook:
- Consolidated net sales of at least $680 million – Includes
standalone contribution of $650 million and Perrigo Animal Health
partial year contribution of $30 million
- Adjusted EBITDA* of at least $62 million – Includes standalone
contribution of $56 million and Perrigo Animal Health partial year
contribution of $6 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, in
conjunction with its 2019 full year earnings release. 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, November
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 877-300-8521 and international listeners may dial
412-317-6026.
A replay of the conference call will be archived
on the Company’s website and telephonic playback will be available
through November 28, 2019. North American listeners may dial
844-512-2921 and international listeners may dial 412-317-6671 the
passcode is 10136413.
About PetIQ
PetIQ is a leading pet medication and wellness
company delivering a smarter way for pet parents to help their pets
live their best lives through convenient access to affordable
veterinary products and services. The company engages with
customers through more than 60,000 points of distribution across
retail and e-commerce channels with its branded distributed
medications, which is further supported by its own world-class
medications manufacturing facility in Omaha, Nebraska. The
company’s national service platform, VIP Petcare, operates in over
3,400 retail partner locations in 41 states providing cost
effective and convenient veterinary wellness services. PetIQ
believes that pets are an important part of the family and deserve
the best products and care we can give them.
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, (ii) to evaluate the effectiveness of our
business strategies and (iii) allow for improved comparability over
prior periods due to significant growth in the Company’s new
wellness centers. 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) |
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,455 |
|
|
$ |
66,360 |
|
Accounts receivable, net |
|
|
98,788 |
|
|
|
45,007 |
|
Inventories |
|
|
97,967 |
|
|
|
92,142 |
|
Other current assets |
|
|
6,207 |
|
|
|
4,212 |
|
Total current assets |
|
|
213,417 |
|
|
|
207,721 |
|
Property, plant and equipment, net |
|
|
45,815 |
|
|
|
27,335 |
|
Operating lease right of use assets |
|
|
21,987 |
|
|
|
— |
|
Deferred tax assets |
|
|
53,414 |
|
|
|
43,946 |
|
Other non-current assets |
|
|
1,966 |
|
|
|
2,857 |
|
Intangible assets, net |
|
|
121,721 |
|
|
|
88,546 |
|
Goodwill |
|
|
231,764 |
|
|
|
125,029 |
|
Total assets |
|
$ |
690,084 |
|
|
$ |
495,434 |
|
Liabilities and equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
58,743 |
|
|
$ |
54,768 |
|
Accrued wages payable |
|
|
8,674 |
|
|
|
5,295 |
|
Accrued interest payable |
|
|
124 |
|
|
|
728 |
|
Other accrued expenses |
|
|
3,998 |
|
|
|
1,154 |
|
Current portion of operating leases |
|
|
4,745 |
|
|
|
— |
|
Current portion of long-term debt and finance leases |
|
|
3,504 |
|
|
|
2,251 |
|
Total current liabilities |
|
|
79,788 |
|
|
|
64,196 |
|
Operating leases, less current installments |
|
|
17,561 |
|
|
|
— |
|
Long-term debt, less current installments |
|
|
254,745 |
|
|
|
107,418 |
|
Finance leases, less current installments |
|
|
1,879 |
|
|
|
2,319 |
|
Other non-current liabilities |
|
|
236 |
|
|
|
524 |
|
Total non-current liabilities |
|
|
274,421 |
|
|
|
110,261 |
|
Commitments and contingencies |
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Additional paid-in capital |
|
|
292,810 |
|
|
|
262,219 |
|
Class A common stock, par value $0.001 per share, 125,000 shares
authorized; 23,302 and 21,620 shares issued and outstanding,
respectively |
|
|
23 |
|
|
|
22 |
|
Class B common stock, par value $0.001 per share, 100,000 shares
authorized; 4,957 and 6,547 shares issued and outstanding,
respectively |
|
|
6 |
|
|
|
7 |
|
Accumulated deficit |
|
|
(4,914 |
) |
|
|
(4,450 |
) |
Accumulated other comprehensive loss |
|
|
(1,661 |
) |
|
|
(1,316 |
) |
Total stockholders' equity |
|
|
286,264 |
|
|
|
256,481 |
|
Non-controlling interest |
|
|
49,611 |
|
|
|
64,496 |
|
Total equity |
|
|
335,875 |
|
|
|
320,977 |
|
Total liabilities and equity |
|
$ |
690,084 |
|
|
$ |
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 Nine Months Ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
161,534 |
|
|
$ |
108,524 |
|
|
$ |
482,224 |
|
|
$ |
355,088 |
|
Services revenue |
|
|
24,491 |
|
|
|
22,858 |
|
|
|
72,871 |
|
|
|
62,502 |
|
Total net sales |
|
|
186,025 |
|
|
|
131,382 |
|
|
|
555,095 |
|
|
|
417,590 |
|
Cost of products sold |
|
|
140,839 |
|
|
|
90,155 |
|
|
|
416,748 |
|
|
|
302,324 |
|
Cost of services |
|
|
17,895 |
|
|
|
17,045 |
|
|
|
51,426 |
|
|
|
48,883 |
|
Total cost of
sales |
|
|
158,734 |
|
|
|
107,200 |
|
|
|
468,174 |
|
|
|
351,207 |
|
Gross profit |
|
|
27,291 |
|
|
|
24,182 |
|
|
|
86,921 |
|
|
|
66,383 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
29,345 |
|
|
|
17,621 |
|
|
|
74,333 |
|
|
|
53,532 |
|
Contingent note revaluations loss (gain) |
|
|
2,310 |
|
|
|
(350 |
) |
|
|
3,090 |
|
|
|
250 |
|
Operating (loss) income |
|
|
(4,364 |
) |
|
|
6,911 |
|
|
|
9,498 |
|
|
|
12,601 |
|
Interest expense, net |
|
|
(5,742 |
) |
|
|
(2,159 |
) |
|
|
(9,921 |
) |
|
|
(6,140 |
) |
Foreign currency (loss) gain, net |
|
|
— |
|
|
|
(50 |
) |
|
|
(73 |
) |
|
|
8 |
|
Other income (expense), net |
|
|
6 |
|
|
|
1 |
|
|
|
21 |
|
|
|
(372 |
) |
Total other expense, net |
|
|
(5,736 |
) |
|
|
(2,208 |
) |
|
|
(9,973 |
) |
|
|
(6,504 |
) |
Pretax
net (loss) income |
|
|
(10,100 |
) |
|
|
4,703 |
|
|
|
(475 |
) |
|
|
6,097 |
|
Income
tax benefit (expense) |
|
|
1,304 |
|
|
|
(801 |
) |
|
|
(77 |
) |
|
|
(754 |
) |
Net (loss) income |
|
|
(8,796 |
) |
|
|
3,902 |
|
|
|
(552 |
) |
|
|
5,343 |
|
Net
(loss) income attributable to non-controlling interest |
|
|
(2,906 |
) |
|
|
1,681 |
|
|
|
(88 |
) |
|
|
2,651 |
|
Net
(loss) income attributable to PetIQ, Inc. |
|
$ |
(5,890 |
) |
|
$ |
2,221 |
|
|
$ |
(464 |
) |
|
$ |
2,692 |
|
Net (loss) income per
share attributable to PetIQ, Inc. Class A common
stock |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.26 |
) |
|
$ |
0.13 |
|
|
$ |
(0.02 |
) |
|
$ |
0.17 |
|
Diluted |
|
$ |
(0.26 |
) |
|
$ |
0.13 |
|
|
$ |
(0.02 |
) |
|
$ |
0.17 |
|
Weighted Average
shares of Class A common stock outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
22,365 |
|
|
|
16,944 |
|
|
|
22,087 |
|
|
|
15,842 |
|
Diluted |
|
|
22,365 |
|
|
|
17,239 |
|
|
|
22,087 |
|
|
|
15,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited, in 000’s) |
|
|
|
For the Nine Months Ended
September 30, |
|
|
2019 |
|
|
2018 |
|
Cash flows from operating
activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(552 |
) |
|
$ |
5,343 |
|
Adjustments to reconcile net (loss) income to net cash used in
operating activities |
|
|
|
|
|
|
Depreciation and amortization of intangible assets and loan
fees |
|
|
11,005 |
|
|
|
8,927 |
|
Foreign exchange loss on liabilities |
|
|
— |
|
|
|
16 |
|
Loss on disposition of property, plant, and equipment |
|
|
(25 |
) |
|
|
(41 |
) |
Stock based compensation expense |
|
|
4,747 |
|
|
|
2,678 |
|
Deferred tax adjustment |
|
|
37 |
|
|
|
761 |
|
Contingent note revaluations |
|
|
3,090 |
|
|
|
250 |
|
Other non-cash activity |
|
|
146 |
|
|
|
(334 |
) |
Changes in assets and liabilities |
|
|
|
|
|
|
Accounts receivable |
|
|
(41,684 |
) |
|
|
(23,299 |
) |
Inventories |
|
|
12,137 |
|
|
|
(24,745 |
) |
Other assets |
|
|
1,368 |
|
|
|
3,681 |
|
Accounts payable |
|
|
1,026 |
|
|
|
11,182 |
|
Accrued wages payable |
|
|
2,401 |
|
|
|
942 |
|
Other accrued expenses |
|
|
(2,299 |
) |
|
|
1,291 |
|
Net
cash used in operating activities |
|
|
(8,603 |
) |
|
|
(13,348 |
) |
Cash flows from investing
activities |
|
|
|
|
|
|
Proceeds from disposition of property, plant, and equipment |
|
|
70 |
|
|
|
108 |
|
Purchase of property, plant, and equipment |
|
|
(5,128 |
) |
|
|
(6,128 |
) |
Business acquisitions (net of cash acquired) |
|
|
(185,090 |
) |
|
|
(92,083 |
) |
Net
cash used in investing activities |
|
|
(190,148 |
) |
|
|
(98,103 |
) |
Cash flows from financing
activities |
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
661,084 |
|
|
|
427,778 |
|
Principal payments on long-term debt |
|
|
(511,681 |
) |
|
|
(346,137 |
) |
Tax Distributions to LLC Owners |
|
|
(1,641 |
) |
|
|
(1,455 |
) |
Principal payments on finance lease obligations |
|
|
(1,103 |
) |
|
|
(861 |
) |
Payment of deferred financing fees and debt discount |
|
|
(5,362 |
) |
|
|
(2,675 |
) |
Exercise of options to purchase common stock |
|
|
1,588 |
|
|
|
1,429 |
|
Net
cash provided by financing activities |
|
|
142,885 |
|
|
|
78,079 |
|
Net change in cash and cash equivalents |
|
|
(55,866 |
) |
|
|
(33,372 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(39 |
) |
|
|
(42 |
) |
Cash
and cash equivalents, beginning of period |
|
|
66,360 |
|
|
|
37,896 |
|
Cash
and cash equivalents, end of period |
|
$ |
10,455 |
|
|
$ |
4,482 |
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Summary Segment Results |
(Unaudited, in 000’s) |
|
|
|
For the three months ended |
|
For the nine months ended |
$'s in 000's |
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
Services segment sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Same-store sales |
|
$ |
21,908 |
|
|
$ |
21,386 |
|
|
$ |
66,617 |
|
|
$ |
59,727 |
|
Non same-store sales |
|
|
2,583 |
|
|
|
1,472 |
|
|
|
6,254 |
|
|
|
2,775 |
|
Net services segment sales |
|
|
24,491 |
|
|
|
22,858 |
|
|
|
72,871 |
|
|
|
62,502 |
|
Products segment sales |
|
|
161,534 |
|
|
|
108,524 |
|
|
|
482,224 |
|
|
|
355,088 |
|
Total net sales |
|
|
186,025 |
|
|
|
131,382 |
|
|
|
555,095 |
|
|
|
417,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
20,506 |
|
|
|
14,642 |
|
|
|
56,030 |
|
|
|
41,337 |
|
Services |
|
|
7,048 |
|
|
|
5,217 |
|
|
|
18,147 |
|
|
|
13,049 |
|
Unallocated Corporate |
|
|
(8,296 |
) |
|
|
(6,450 |
) |
|
|
(23,217 |
) |
|
|
(19,327 |
) |
Total Adjusted EBITDA |
|
$ |
19,258 |
|
|
$ |
13,409 |
|
|
$ |
50,960 |
|
|
$ |
35,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Reconciliation between gross profit and adjusted gross
profit |
(Unaudited, in 000’s) |
|
|
|
For the three months ended |
|
For the nine months ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
Gross profit |
|
$ |
27,291 |
|
$ |
24,182 |
|
$ |
86,921 |
|
$ |
66,383 |
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustment to inventory |
|
|
2,403 |
|
|
— |
|
|
2,403 |
|
|
1,502 |
Non same-store gross loss(5) |
|
|
2,811 |
|
|
2,373 |
|
|
6,436 |
|
|
3,892 |
SKU rationalization(3) |
|
|
6,482 |
|
|
— |
|
|
6,482 |
|
|
— |
Adjusted gross profit |
|
$ |
38,987 |
|
$ |
26,555 |
|
$ |
102,242 |
|
$ |
71,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Reconciliation between Net Income and Adjusted
EBITDA |
(Unaudited, in 000’s) |
|
|
|
For the three months ended |
|
For the nine months ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
Net (loss) income |
|
$ |
(8,796 |
) |
|
$ |
3,902 |
|
|
$ |
(552 |
) |
|
$ |
5,343 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) expense |
|
|
(1,304 |
) |
|
|
801 |
|
|
|
77 |
|
|
|
754 |
|
Depreciation |
|
|
2,404 |
|
|
|
1,786 |
|
|
|
5,587 |
|
|
|
4,816 |
|
Amortization |
|
|
1,807 |
|
|
|
1,294 |
|
|
|
4,364 |
|
|
|
3,691 |
|
Interest |
|
|
5,742 |
|
|
|
2,159 |
|
|
|
9,921 |
|
|
|
6,140 |
|
EBITDA |
|
$ |
(147 |
) |
|
$ |
9,942 |
|
|
$ |
19,397 |
|
|
$ |
20,744 |
|
Acquisition costs(1) |
|
|
1,960 |
|
|
|
113 |
|
|
|
5,425 |
|
|
|
3,479 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
1,166 |
|
|
|
57 |
|
|
|
2,308 |
|
|
|
813 |
|
SKU rationalization(3) |
|
|
6,482 |
|
|
|
— |
|
|
|
6,482 |
|
|
|
— |
|
Purchase accounting adjustment to inventory |
|
|
2,403 |
|
|
|
— |
|
|
|
2,403 |
|
|
|
1,502 |
|
Stock based compensation expense |
|
|
1,601 |
|
|
|
1,224 |
|
|
|
4,747 |
|
|
|
2,678 |
|
Fair value adjustment of contingent note(4) |
|
|
2,310 |
|
|
|
(350 |
) |
|
|
3,090 |
|
|
|
250 |
|
Non same-store revenue(5) |
|
|
(2,583 |
) |
|
|
(1,472 |
) |
|
|
(6,254 |
) |
|
|
(2,775 |
) |
Non same-store costs(5) |
|
|
5,394 |
|
|
|
3,845 |
|
|
|
12,690 |
|
|
|
6,667 |
|
Clinic launch expenses(6) |
|
|
672 |
|
|
|
50 |
|
|
|
672 |
|
|
|
1,261 |
|
Non-recurring royalty settlement(7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
440 |
|
Adjusted EBITDA |
|
$ |
19,258 |
|
|
$ |
13,409 |
|
|
$ |
50,960 |
|
|
$ |
35,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Acquisition costs relating to acquisitions of VIP Petcare, HBH and
Perrigo Animal Health. |
(2) |
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, contract termination, and IT
conversion costs, in addition to costs associated with vet services
clinics that were discontinued subsequent to the acquisition of VIP
Petcare. These costs are primarily in the unallocated
corporate segment for personnel costs, legal and consulting
expenses, and IT costs, the costs of discontinued clinics from 2018
are part of the Services Segment, with no comparable discontinued
clinics in 2019. |
(3) |
SKU rationalization relates to
the disposal of or reserve to estimated net realizable value for
inventory that will either no longer be sold, or will be
de-emphasized, as the Company aligns brands between Legacy PetIQ
brands and brands acquired as part of the Perrigo Animal Health
Acquisition. All costs are included in the Products segment
gross margin. |
(4) |
Fair value adjustment of the
contingent note relates to the 2019 Contingent Note related to the
VIP acquisition, as the Company’s operations have improved the
likelihood of earning the note have increased. |
(5) |
Non same-store revenue and costs
relate to our Services segment and are from wellness centers, host
partners, and regions with less than six full trailing quarters of
operating results. |
(6) |
Clinic launch expenses relate to
our Services segment and represent the nonrecurring costs to open
new veterinary wellness centers, primarily employee costs,
training, marketing, and rent prior to opening for business. |
(7) |
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 (loss) income and adjusted net
income |
(Unaudited, in 000’s) |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
|
September 30, 2019 |
|
September 30, 2018 |
Net (loss) income |
|
$ |
(8,796 |
) |
|
$ |
3,902 |
|
|
$ |
(552 |
) |
|
$ |
5,343 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense (benefit) |
|
|
(1,304 |
) |
|
|
801 |
|
|
|
77 |
|
|
|
754 |
|
Acquisition costs(1) |
|
|
1,960 |
|
|
|
113 |
|
|
|
5,425 |
|
|
|
3,479 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
1,166 |
|
|
|
57 |
|
|
|
2,308 |
|
|
|
813 |
|
SKU rationalization(3) |
|
|
6,482 |
|
|
|
— |
|
|
|
6,482 |
|
|
|
— |
|
Purchase accounting adjustment to inventory |
|
|
2,403 |
|
|
|
— |
|
|
|
2,403 |
|
|
|
1,502 |
|
Stock based compensation expense |
|
|
1,601 |
|
|
|
1,224 |
|
|
|
4,747 |
|
|
|
2,678 |
|
Fair value adjustment of contingent note(4) |
|
|
2,310 |
|
|
|
(350 |
) |
|
|
3,090 |
|
|
|
250 |
|
Non same-store revenue(5) |
|
|
(2,583 |
) |
|
|
(1,472 |
) |
|
|
(6,254 |
) |
|
|
(2,775 |
) |
Non same-store costs(5) |
|
|
5,394 |
|
|
|
3,845 |
|
|
|
12,690 |
|
|
|
6,667 |
|
Clinic launch expenses(6) |
|
|
672 |
|
|
|
50 |
|
|
|
672 |
|
|
|
1,261 |
|
Non-recurring royalty settlement(7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
440 |
|
Adjusted Net income |
|
$ |
9,305 |
|
|
$ |
8,170 |
|
|
$ |
31,088 |
|
|
$ |
20,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Acquisition costs relating to acquisitions of VIP Petcare, HBH and
Perrigo Animal Health. |
(2) |
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, contract termination, and IT
conversion costs, in addition to costs associated with vet services
clinics that were discontinued subsequent to the acquisition of VIP
Petcare. These costs are primarily in the corporate segment
for personnel costs, legal and consulting expenses, and IT costs,
the costs of discontinued clinics from 2018 are part of the
Services Segment. |
(3) |
SKU rationalization relates to
the disposal of or reserve to estimated net realizable value for
inventory that will either no longer be sold, or will be
de-emphasized, as the Company aligns brands between Legacy PetIQ
brands and brands acquired as part of the Perrigo Animal Health
Acquisition. All costs are included in the Products segment
gross margin. |
(4) |
Fair value adjustment of the
contingent note relates to the 2019 Contingent Note related to the
VIP acquisition, as the Company’s operations have improved the
likelihood of earning the note have increased. |
(5) |
Non same-store revenue and costs
relate to our Services segment and are from wellness centers, host
partners, and regions with less than six full trailing quarters of
operating results. |
(6) |
Clinic launch expenses relate to
our Services segment and represent the nonrecurring costs to open
new veterinary wellness centers, primarily employee costs,
training, marketing, and rent prior to opening for business. |
(7) |
Non-recurring royalty settlement
represents a settlement paid to a supplier related to a royalty
agreement in place since 2013. |
|
|
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