PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading
pet medication and wellness company, today reported financial
results for the fourth quarter and full year ended December 31,
2019.
“Our model of providing affordable and
convenient access to veterinary products and services continues to
gain momentum, demonstrated by 45% compounded sales growth and 65%
compounded adjusted EBITDA growth since our IPO July 2017 through
2020,” commented Cord Christensen, PetIQ’s Chairman and Chief
Executive Officer. “In 2019, we were able to deliver another
strong year with net sales growth of 34% and adjusted EBITDA growth
of 49%. We believe this demonstrates that our mission of
providing convenient access to affordable veterinarian products and
services is increasingly resonating with pet parents across the
country. During 2019, we made another strategic acquisition with
the addition of Perrigo Animal Health and most recently in January
announced the definitive agreement to acquire the Capstar®
portfolio of products to further strengthen and diversify our
profitability. We believe that these acquisitions, together
with the strength of our existing business will position PetIQ to
achieve pro forma adjusted EBITDA of over $100 million, assuming a
full year of contribution from Capstar.”
Fourth Quarter 2019 Highlights Compared
to Prior Year Period
- Record fourth quarter net sales of
$154.3 million, an increase of 39.0%; excluding contribution from
Perrigo Animal Health, net sales increased 27.9%
- Opened 71 veterinary wellness centers
in the fourth quarter compared to 3 in the prior year period
- Net loss of $13.8 million, compared to
net loss of $5.3 million, included $11.5 million of incremental
expense attributable to $8.8 million of non-recurring acquisition
expenses and $2.7 million of incremental interest expense. Net loss
also included $5.0 million of net non-same store contribution.
- Adjusted net loss of $0.03 million
compared to adjusted net income of $1.2 million.
- Adjusted EBITDA of $9.7 million
compared to $6.5 million, an increase of 49.1%
Full Year 2019 Highlights Compared to Prior Year
Period
- Record 2019 net sales of $709.4
million, an increase of 34.2%; excluding contribution from Perrigo
Animal Health, net sales increased 28.8%
- Opened 80 veterinary wellness centers
across 22 states and 5 host retail partners in 2019 compared to 25
in 2018
- Net loss of $14.3 million, compared to
net income of $0.1 million, included $34.9 million incremental
expense attributable to $28.5 million of non-recurring acquisition
expenses and $6.4 million of incremental interest. Net loss also
included $11.5 million of net non-same store contribution.
- Adjusted net income of $31.0 million
compared to $21.7 million
- Adjusted EBITDA of $60.7 million
compared to $41.5 million, an increase of 46.0%
- Completed a strategic acquisition of
Perrigo Animal Health in July 2019 and announced definitive
agreement to acquire Capstar® in January 2020
- Cash and cash equivalents of $27.3
million with total liquidity of $127.3 million at year end
Outlook
The Company expects the following for the full
year ending December 31, 2020, on a stand-alone basis (which
includes a full year contribution from the Perrigo Animal Health
acquisition)
- Consolidated net sales of at least
$800 million
- Adjusted EBITDA* of at least $80
million
- The addition of at least 130 new
veterinary wellness centers for a total of at least 229 in
operation at December 31, 2020
On a pro forma basis, assuming a full year of
contribution from the pending Capstar® acquisition, the Company
would expect the following for 2020:
- Consolidated net sales of at least
$815 million
- Adjusted EBITDA* of at least $100
million
The Capstar acquisition is expected to close
early in the third quarter of 2020. See “Capstar Acquisition”
below for additional
information. *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.
Fourth Quarter 2019 Financial
Results
Net sales increased 39.0% to $154.3 million for
the fourth quarter of 2019, compared to $111.0 million for the same
period in the prior year. Excluding contribution from Perrigo
Animal Health, net sales increased 27.9%. Product segment sales
were $134.9 million and Services segment revenues were $19.4
million in the fourth 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 $20.5 million, an increase of
21.0% compared to $16.9 million in the same period last year. Gross
margin for the quarter was 13.3%. Adjusted gross profit was $26.8
million and adjusted gross margin was 17.4% for the fourth quarter
2019. The GAAP gross margin to adjusted gross margin
difference of 410 basis points is a result of the exclusion of
Services segment non-same-store contribution.
Net loss of $13.8 million, compared to net loss
of $5.3 million, includes $11.5 million of incremental expense
attributable to $8.8 million of non-recurring acquisition expenses
and $2.7 million of incremental interest expense, relating to the
financing of the Perrigo Animal Health acquisition that closed in
July 2019. The $8.8 million of non-recurring expenses, included
$4.6 million acquisition and purchase accounting adjustment related
costs, as well as a $4.2 million fair value adjustment to a
contingent note. Net income also included $5.0 million of net
losses on non-same store operations.
Adjusted net loss was $0.03 million for the
fourth quarter of 2019 compared to $1.2 million of adjusted net
income in the prior year period.
Fourth quarter adjusted EBITDA increased 49.4%
to $9.7 million compared to $6.5 million for the same period in the
prior year. Adjusted EBITDA margin increased 50 basis points
to 6.3% compared to 5.8% in the prior year period.
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 management 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.
Full Year 2019 Financial
Results
Net sales increased 34.2% to $709.4 million for
the full year 2019, compared to $528.6 million in 2018. Excluding
contribution from Perrigo Animal Health, net sales increased 28.7%.
Product segment sales were $617.1 million and the Services segment
revenues were $92.3 million for 2019.
Gross profit was $107.4 million, an increase of
28.9% as compared to $83.3 million in 2018. Gross margin for 2019
was 15.1%. Adjusted gross profit was $127.5 million and adjusted
gross margin increased 90 basis points to 18.0% for the full year
ended December 31, 2019. The GAAP gross margin to adjusted
gross margin difference of 290 basis points was the result of the
exclusion of Services segment non-same-store contribution and SKU
rationalization and purchase accounting adjustments related to the
Perrigo Animal Health acquisition.
Net loss of $14.3 million, compared to net loss
of $0.1 million, includes $34.9 million of incremental expense
attributable to $28.5 million of non-recurring acquisition expenses
and $6.4 million of incremental interest expense, relating to the
financing of the Perrigo Animal Health acquisition that closed in
July 2019. The $28.5 million of non-recurring expenses, included
$21.2 million acquisition and purchase accounting adjustment
related costs, as well as a $7.3 million fair value adjustment to a
contingent note. Net income also included $11.5 million of net
losses on non-same store operations.
Adjusted net income was $31.0 million for the
full year 2019, an increase of 40.8% compared to $21.7 million in
2018.
Full year 2019 adjusted EBITDA increased 46.0%
to $60.7 million compared to $41.5 million in 2018. Adjusted
EBITDA margin increased 70 basis points to 8.6% compared to 7.9% in
2018.
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 fourth quarter of 2019, the
Product segment net sales increased 41.8% to $134.9 million and,
excluding contribution from Perrigo Animal Health, Product segment
net sales increased 28.8%. Product adjusted EBITDA increased 63% to
$17.1 million. This compares to Product segment sales and
adjusted EBITDA of $95.1 million and $10.5 million, respectively,
for the fourth quarter of 2018.
Full year 2019, Product segment net sales
increased 37.1% to $617.1 million and Product adjusted EBITDA
increased 40.9% to $73.5 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 fourth quarter of 2019,
Services segment net revenues increased 22.4% to $19.4 million
compared to $15.9 million in the same period last year.
Services adjusted EBITDA of $1.9 million includes $1.2 million of
strategic marketing and labor investments to support new community
clinic openings following conversion of the Company’s wellness
centers.
Full year 2019 Services segment net revenues
increased 17.8% to $92.3 million compared to $78.4 million in
2018. Services segment adjusted EBITDA increased 31.5% to
$20.0 million compared to $15.2 million in 2018. Services segment
growth was achieved from the contribution of new wellness centers
moving into the same-store base, growth in products sold to pet
parents and double-digit pet count growth in existing clinics.
Services same store revenue increased by 19.9%
and 13.2% for the fourth quarter and full year ended December 31,
2019, respectively. Non-same store revenue increased 53.9%
and 103.9% to $1.8 million and $8.1 million for the three and
twelve months ended December 31, 2019, respectively. Non-same
store growth is a result of opening additional wellness centers, as
well as clinics opened in the prior year maturing, before moving
into the same-store sales base. Wellness centers, host
partners and regional offices with less than six trailing quarters
of operating results are excluded from our same store sales
base.
The Company opened 80 wellness center locations
in 2019, for a total of 99 units in operation at year end. In
support of its veterinarian wellness center expansion, the Company
operated 37 regional offices as of December 31, 2019.
Balance Sheet
As of December 31, 2019, the Company had cash
and cash equivalents of $27.3 million, plus availability on its
revolving credit facility of $100.0 million, equating to $127.3
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 $259.3 million as of
December 31, 2019. From a working capital perspective,
accounts receivable increased $26.4 million compared to December
31, 2018, in line with the Company’s strong sales growth. Inventory
decreased $12.4 million compared to the prior year due to
seasonality and SKU rationalization.
Capstar® Acquisition
As previously announced, on January 13, 2020
PetIQ entered into a definitive agreement under which PetIQ will
acquire Capstar, the #1 oral over-the-counter ("OTC") flea
treatment product in the United States, from Elanco Animal Health,
Inc. ("Elanco") (NYSE: ELAN). The Company continues to expect the
closing of the transaction to occur upon approval of the
acquisition under a consent order issued by the U.S. Federal Trade
Commission. The Company now anticipates this approval to be
received by the end of second quarter 2020, with closing
anticipated early in the third quarter of 2020. The assets
associated with the Capstar portfolio will be acquired for $95
million in cash. PetIQ will own the complementary product portfolio
of Capstar’s highly recognized brand allowing for PetIQ to realize
short, mid and long term value creation putting PetIQ in a more
competitive position in anti-parasitics, a key growth segment of
the animal health industry. The Company plans to finance the
transaction within PetIQ's existing debt facilities and cash on
hand. Pro forma for the transaction, including the annualized
EBITDA contribution of Capstar, PetIQ expects an immaterial change
to its net debt-to-Adjusted EBITDA leverage ratio. PetIQ remains
committed to reducing its leverage through a combination of organic
growth and free cash flow.
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, March 10,
2020, 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 April 1, 2020. North American listeners may dial
844-512-2921 and international listeners may dial 412-317-6671 the
passcode is 13699125.
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 and Adjusted EBITDA are non-GAAP
financial measures. EBITDA represents net income before interest,
income taxes and depreciation and amortization. Adjusted EBITDA
represents EBITDA plus adjustments for transactions that management
does not believe are representative of our core ongoing business.
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.
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.Consolidated
Balance Sheets(Unaudited, in 000’s except for per
share amounts)
|
|
|
|
|
December 31, 2019 |
|
December 31, 2018 |
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
27,272 |
|
|
$ |
66,360 |
|
Accounts receivable, net |
|
|
71,377 |
|
|
|
45,007 |
|
Inventories |
|
|
79,703 |
|
|
|
92,142 |
|
Other current assets |
|
|
7,071 |
|
|
|
4,212 |
|
Total current assets |
|
|
185,423 |
|
|
|
207,721 |
|
Property, plant and equipment, net |
|
|
52,525 |
|
|
|
27,335 |
|
Operating lease right of use assets |
|
|
20,785 |
|
|
|
— |
|
Deferred tax assets |
|
|
59,780 |
|
|
|
43,946 |
|
Other non-current assets |
|
|
3,214 |
|
|
|
2,857 |
|
Intangible assets, net |
|
|
119,956 |
|
|
|
88,546 |
|
Goodwill |
|
|
231,045 |
|
|
|
125,029 |
|
Total assets |
|
$ |
672,728 |
|
|
$ |
495,434 |
|
Liabilities and equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
51,538 |
|
|
$ |
54,768 |
|
Accrued wages payable |
|
|
9,082 |
|
|
|
5,295 |
|
Accrued interest payable |
|
|
83 |
|
|
|
728 |
|
Other accrued expenses |
|
|
3,871 |
|
|
|
1,154 |
|
Current portion of operating leases |
|
|
4,619 |
|
|
|
— |
|
Current portion of long-term debt and finance leases |
|
|
3,821 |
|
|
|
2,251 |
|
Total current liabilities |
|
|
73,014 |
|
|
|
64,196 |
|
Operating leases, less current installments |
|
|
16,580 |
|
|
|
— |
|
Long-term debt, less current installments |
|
|
251,376 |
|
|
|
107,418 |
|
Finance leases, less current installments |
|
|
3,331 |
|
|
|
2,319 |
|
Other non-current liabilities |
|
|
117 |
|
|
|
524 |
|
Total non-current liabilities |
|
|
271,404 |
|
|
|
110,261 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Additional paid-in capital |
|
|
300,120 |
|
|
|
262,219 |
|
Class A common stock, par value $0.001 per share, 125,000 shares
authorized; 23,554 and 21,620 shares issued and outstanding,
respectively |
|
|
23 |
|
|
|
22 |
|
Class B common stock, par value $0.001 per share, 100,000 shares
authorized; 4,752 and 6,547 shares issued and outstanding,
respectively |
|
|
5 |
|
|
|
7 |
|
Accumulated deficit |
|
|
(15,903 |
) |
|
|
(4,450 |
) |
Accumulated other comprehensive loss |
|
|
(1,131 |
) |
|
|
(1,316 |
) |
Total stockholders' equity |
|
|
283,114 |
|
|
|
256,481 |
|
Non-controlling interest |
|
|
45,196 |
|
|
|
64,496 |
|
Total equity |
|
|
328,310 |
|
|
|
320,977 |
|
Total liabilities and equity |
|
$ |
672,728 |
|
|
$ |
495,434 |
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc.Consolidated
Statements of (Loss) Income (Unaudited, in
000’s, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Year Ended |
|
|
December 31, 2019 |
|
December 31, 2018 |
|
December 31, 2019 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
134,894 |
|
|
$ |
95,141 |
|
|
$ |
617,118 |
|
|
$ |
450,229 |
|
Services revenue |
|
|
19,442 |
|
|
|
15,883 |
|
|
|
92,313 |
|
|
|
78,385 |
|
Total net sales |
|
|
154,336 |
|
|
|
111,024 |
|
|
|
709,431 |
|
|
|
528,614 |
|
Cost of products sold |
|
|
113,283 |
|
|
|
81,177 |
|
|
|
530,031 |
|
|
|
383,501 |
|
Cost of
services |
|
|
20,591 |
|
|
|
12,942 |
|
|
|
72,017 |
|
|
|
61,825 |
|
Total
cost of sales |
|
|
133,874 |
|
|
|
94,119 |
|
|
|
602,048 |
|
|
|
445,326 |
|
Gross profit |
|
|
20,462 |
|
|
|
16,905 |
|
|
|
107,383 |
|
|
|
83,288 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
28,867 |
|
|
|
18,728 |
|
|
|
103,200 |
|
|
|
72,260 |
|
Contingent note revaluations loss (gain) |
|
|
4,230 |
|
|
|
3,030 |
|
|
|
7,320 |
|
|
|
3,280 |
|
Operating (loss) income |
|
|
(12,635 |
) |
|
|
(4,853 |
) |
|
|
(3,137 |
) |
|
|
7,748 |
|
Interest expense, net |
|
|
(4,574 |
) |
|
|
(1,882 |
) |
|
|
(14,495 |
) |
|
|
(8,022 |
) |
Foreign currency (loss) gain, net |
|
|
(78 |
) |
|
|
37 |
|
|
|
(151 |
) |
|
|
45 |
|
Other income (expense), net |
|
|
163 |
|
|
|
27 |
|
|
|
172 |
|
|
|
(345 |
) |
Total other expense, net |
|
|
(4,489 |
) |
|
|
(1,818 |
) |
|
|
(14,474 |
) |
|
|
(8,322 |
) |
Pretax
net (loss) income |
|
|
(17,124 |
) |
|
|
(6,671 |
) |
|
|
(17,611 |
) |
|
|
(574 |
) |
Income
tax benefit (expense) |
|
|
3,386 |
|
|
|
1,415 |
|
|
|
3,309 |
|
|
|
661 |
|
Net (loss) income |
|
|
(13,738 |
) |
|
|
(5,256 |
) |
|
|
(14,302 |
) |
|
|
87 |
|
Net
(loss) income attributable to non-controlling interest |
|
|
(2,761 |
) |
|
|
(1,782 |
) |
|
|
(2,849 |
) |
|
|
869 |
|
Net
(loss) income attributable to PetIQ, Inc. |
|
$ |
(10,977 |
) |
|
$ |
(3,474 |
) |
|
$ |
(11,453 |
) |
|
$ |
(782 |
) |
Net (loss) income per
share attributable to PetIQ, Inc. Class A common
stock |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.47 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.05 |
) |
Diluted |
|
$ |
(0.47 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.05 |
) |
Weighted Average
shares of Class A common stock outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
23,436 |
|
|
|
21,283 |
|
|
|
22,652 |
|
|
|
17,216 |
|
Diluted |
|
|
23,436 |
|
|
|
21,283 |
|
|
|
22,652 |
|
|
|
17,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc.Condensed
Consolidated Statements of Cash Flows(Unaudited,
in 000’s)
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
|
|
2019 |
|
2018 |
Cash flows from operating
activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14,302 |
) |
|
$ |
87 |
|
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities |
|
|
|
|
|
|
Depreciation and amortization of intangible assets and loan
fees |
|
|
16,509 |
|
|
|
12,467 |
|
Foreign exchange loss on liabilities |
|
|
— |
|
|
|
16 |
|
(Gain) Loss on disposition of property, plant, and equipment |
|
|
(189 |
) |
|
|
(90 |
) |
Stock based compensation expense |
|
|
7,355 |
|
|
|
3,812 |
|
Deferred tax adjustment |
|
|
(3,458 |
) |
|
|
(843 |
) |
Contingent note revaluation |
|
|
7,320 |
|
|
|
3,280 |
|
Other non-cash activity |
|
|
405 |
|
|
|
(334 |
) |
Changes in assets and liabilities |
|
|
|
|
|
|
Accounts receivable |
|
|
(14,123 |
) |
|
|
(14,209 |
) |
Inventories |
|
|
30,448 |
|
|
|
(36,610 |
) |
Other assets |
|
|
(1,619 |
) |
|
|
1,423 |
|
Accounts payable |
|
|
(7,595 |
) |
|
|
15,701 |
|
Accrued wages payable |
|
|
2,800 |
|
|
|
1,979 |
|
Other accrued expenses |
|
|
(2,718 |
) |
|
|
908 |
|
Net
cash provided by (used in) operating activities |
|
|
20,833 |
|
|
|
(12,413 |
) |
Cash flows from investing
activities |
|
|
|
|
|
|
Proceeds from disposition of property, plant, and equipment |
|
|
340 |
|
|
|
229 |
|
Purchase of property, plant, and equipment |
|
|
(10,276 |
) |
|
|
(7,178 |
) |
Business acquisitions (net of cash acquired) |
|
|
(185,090 |
) |
|
|
(93,052 |
) |
Net
cash used in investing activities |
|
|
(195,026 |
) |
|
|
(100,001 |
) |
Cash flows from financing
activities |
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
818,387 |
|
|
|
538,028 |
|
Principal payments on long-term debt |
|
|
(676,509 |
) |
|
|
(466,912 |
) |
Proceeds from public offering of class A common stock, net of
underwriting discounts and offering costs |
|
|
— |
|
|
|
73,914 |
|
Repayment of preference notes |
|
|
— |
|
|
|
— |
|
Change in restricted deposits |
|
|
— |
|
|
|
— |
|
Tax distributions to LLC Owners |
|
|
(1,686 |
) |
|
|
(1,485 |
) |
Purchase of LLC units from Continuing LLC Owners |
|
|
— |
|
|
|
— |
|
Principal payments on finance lease obligations |
|
|
(1,547 |
) |
|
|
(1,254 |
) |
Payment of deferred financing fees and debt discount |
|
|
(5,790 |
) |
|
|
(2,750 |
) |
Tax withholding payments on Restricted Stock Units |
|
|
(114 |
) |
|
|
— |
|
Exercise of options to purchase class A common stock |
|
|
2,318 |
|
|
|
1,429 |
|
Net
cash provided by financing activities |
|
|
135,059 |
|
|
|
140,970 |
|
Net change in cash and cash
equivalents |
|
|
(39,134 |
) |
|
|
28,556 |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
|
46 |
|
|
|
(92 |
) |
Cash
and cash equivalents, beginning of period |
|
|
66,360 |
|
|
|
37,896 |
|
Cash
and cash equivalents, end of period |
|
$ |
27,272 |
|
|
$ |
66,360 |
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc.Summary
Segment Results(Unaudited, in 000’s)
|
|
For the three months ended |
|
For the year ended |
$'s in 000's |
|
December 31, 2019 |
|
December 31, 2018 |
|
December 31, 2019 |
|
December 31, 2018 |
Services segment sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Same-store sales |
|
$ |
17,608 |
|
|
$ |
14,691 |
|
|
$ |
84,225 |
|
|
$ |
74,418 |
|
Non same-store sales |
|
|
1,834 |
|
|
|
1,192 |
|
|
|
8,088 |
|
|
|
3,967 |
|
Net services segment sales |
|
|
19,442 |
|
|
|
15,883 |
|
|
|
92,313 |
|
|
|
78,385 |
|
Products segment sales |
|
|
134,894 |
|
|
|
95,141 |
|
|
|
617,118 |
|
|
|
450,229 |
|
Total net sales |
|
|
154,336 |
|
|
|
111,024 |
|
|
|
709,431 |
|
|
|
528,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
17,093 |
|
|
|
10,498 |
|
|
|
73,537 |
|
|
|
52,185 |
|
Services |
|
|
1,949 |
|
|
|
2,197 |
|
|
|
20,045 |
|
|
|
15,246 |
|
Unallocated Corporate |
|
|
(9,315 |
) |
|
|
(6,215 |
) |
|
|
(32,907 |
) |
|
|
(25,892 |
) |
Total Adjusted EBITDA |
|
$ |
9,726 |
|
|
$ |
6,480 |
|
|
$ |
60,675 |
|
|
$ |
41,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ,
Inc.Reconciliation between gross profit and
adjusted gross profit(Unaudited, in
000’s)
|
|
For the three months ended |
|
For the year ended |
|
|
December 31, 2019 |
|
December 31, 2018 |
|
December 31, 2019 |
|
December 31, 2018 |
Gross profit |
|
$ |
20,462 |
|
|
$ |
16,905 |
|
|
$ |
107,383 |
|
|
$ |
83,288 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustment to inventory |
|
|
2,402 |
|
|
|
647 |
|
|
|
4,805 |
|
|
|
2,149 |
|
Non same-store gross loss(5) |
|
|
3,973 |
|
|
|
2,011 |
|
|
|
8,802 |
|
|
|
5,263 |
|
SKU rationalization(3) |
|
|
— |
|
|
|
— |
|
|
|
6,482 |
|
|
|
— |
|
Clinic launch expense |
|
|
— |
|
|
|
119 |
|
|
|
— |
|
|
|
1,261 |
|
Adjusted gross profit |
|
$ |
26,837 |
|
|
$ |
19,682 |
|
|
$ |
127,472 |
|
|
$ |
91,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ,
Inc.Reconciliation between Net (Loss) Income and
Adjusted EBITDA(Unaudited, in 000’s)
|
|
For the three months ended |
|
For the year ended |
|
|
December 31, 2019 |
|
December 31, 2018 |
|
December 31, 2019 |
|
December 31, 2018 |
Net (loss) income |
|
$ |
(13,738 |
) |
|
$ |
(5,256 |
) |
|
$ |
(14,302 |
) |
|
$ |
87 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax (benefit) expense |
|
|
(3,386 |
) |
|
|
(1,415 |
) |
|
|
(3,309 |
) |
|
|
(661 |
) |
Depreciation |
|
|
3,551 |
|
|
|
1,841 |
|
|
|
9,139 |
|
|
|
6,657 |
|
Amortization |
|
|
1,630 |
|
|
|
1,519 |
|
|
|
5,994 |
|
|
|
5,210 |
|
Interest |
|
|
4,574 |
|
|
|
1,882 |
|
|
|
14,495 |
|
|
|
8,022 |
|
EBITDA |
|
$ |
(7,369 |
) |
|
$ |
(1,429 |
) |
|
$ |
12,017 |
|
|
$ |
19,315 |
|
Acquisition costs(1) |
|
|
722 |
|
|
|
308 |
|
|
|
6,147 |
|
|
|
3,787 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
1,480 |
|
|
|
185 |
|
|
|
3,788 |
|
|
|
998 |
|
SKU rationalization(3) |
|
|
— |
|
|
|
— |
|
|
|
6,482 |
|
|
|
— |
|
Purchase accounting adjustment to inventory |
|
|
2,402 |
|
|
|
647 |
|
|
|
4,805 |
|
|
|
2,149 |
|
Stock based compensation expense |
|
|
2,608 |
|
|
|
1,134 |
|
|
|
7,355 |
|
|
|
3,812 |
|
Fair value adjustment of contingent note(4) |
|
|
4,230 |
|
|
|
3,030 |
|
|
|
7,320 |
|
|
|
3,280 |
|
Non same-store revenue(5) |
|
|
(1,834 |
) |
|
|
(1,192 |
) |
|
|
(8,088 |
) |
|
|
(3,967 |
) |
Non same-store costs(5) |
|
|
6,863 |
|
|
|
3,678 |
|
|
|
19,553 |
|
|
|
10,345 |
|
Clinic launch expenses(6) |
|
|
95 |
|
|
|
119 |
|
|
|
767 |
|
|
|
1,380 |
|
Litigation expenses |
|
|
529 |
|
|
|
— |
|
|
|
529 |
|
|
|
— |
|
Non-recurring royalty settlement(7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
440 |
|
Adjusted EBITDA |
|
$ |
9,726 |
|
|
$ |
6,480 |
|
|
$ |
60,675 |
|
|
$ |
41,539 |
|
(1) |
Acquisition costs include legal, accounting, banking, consulting,
diligence, and other out-of-pocket costs. |
(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. These costs are primarily in
the Products segment and the corporate segment for personnel costs,
legal and consulting expenses, and IT costs. In addition, related
to the Service Segment, there were costs associated with vet
services clinics that were discontinued subsequent to the
acquisition of VIP and wellness center closures. |
(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 on the contingent note represents the non
cash adjustment to mark the 2019 Contingent note to fair
value. |
(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 |
|
Year Ended |
|
|
December 31, 2019 |
|
December 31, 2018 |
|
December 31, 2019 |
|
December 31, 2018 |
Net (loss) income |
|
$ |
(13,738 |
) |
|
$ |
(5,256 |
) |
|
$ |
(14,302 |
) |
|
$ |
87 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense (benefit) |
|
|
(3,386 |
) |
|
|
(1,415 |
) |
|
|
(3,309 |
) |
|
|
(661 |
) |
Acquisition costs(1) |
|
|
722 |
|
|
|
308 |
|
|
|
6,147 |
|
|
|
3,787 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
1,480 |
|
|
|
185 |
|
|
|
3,788 |
|
|
|
998 |
|
SKU rationalization(3) |
|
|
— |
|
|
|
— |
|
|
|
6,482 |
|
|
|
— |
|
Purchase accounting adjustment to inventory |
|
|
2,402 |
|
|
|
647 |
|
|
|
4,805 |
|
|
|
2,149 |
|
Stock based compensation expense |
|
|
2,608 |
|
|
|
1,134 |
|
|
|
7,355 |
|
|
|
3,812 |
|
Fair value adjustment of contingent note(4) |
|
|
4,230 |
|
|
|
3,030 |
|
|
|
7,320 |
|
|
|
3,280 |
|
Non same-store revenue(5) |
|
|
(1,834 |
) |
|
|
(1,192 |
) |
|
|
(8,088 |
) |
|
|
(3,967 |
) |
Non same-store costs(5) |
|
|
6,863 |
|
|
|
3,678 |
|
|
|
19,553 |
|
|
|
10,345 |
|
Clinic launch expenses(6) |
|
|
95 |
|
|
|
119 |
|
|
|
767 |
|
|
|
1,380 |
|
Litigation expenses |
|
|
529 |
|
|
|
— |
|
|
|
529 |
|
|
|
— |
|
Non-recurring royalty settlement(7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
440 |
|
Adjusted Net income |
|
$ |
(29 |
) |
|
$ |
1,238 |
|
|
$ |
31,047 |
|
|
$ |
21,650 |
|
(1) |
Acquisition costs include legal, accounting, banking, consulting,
diligence, and other out-of-pocket costs. |
(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. These costs are primarily in
the Products segment and the corporate segment for personnel costs,
legal and consulting expenses, and IT costs. In addition, related
to the Service Segment, there were costs associated with vet
services clinics that were discontinued subsequent to the
acquisition of VIP and wellness center closures. |
(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 on the contingent note represents the non
cash adjustment to mark the 2019 Contingent note to fair
value. |
(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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