PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading
pet medication and wellness company, today reported financial
results for the first quarter ended March 31, 2020.
“The world changed in March 2020 when the global
COVID-19 pandemic took over our lives. While our immediate
priority is focusing on the safety of our employees, partners, pet
parents, and their pets, our mission of providing convenient access
to affordable pet health care has never been more important.
Our consistent customer execution demonstrates how strategic PetIQ
is to the broader pet healthcare market,” commented Cord
Christensen, PetIQ’s Chairman and Chief Executive
Officer.
Christensen continued, “In early March as the
pandemic accelerated, we experienced a steep decline in traffic and
started closing wellness centers and clinics on March 14,
2020. We then made the strategic decision to temporarily
close all of our clinics on March 20, 2020 to ensure the safety of
our team and do our part to slow the spread of COVID-19 in the
communities we serve. Despite these temporary closures, our
diversified business model has shielded us from more severe
financial impacts, and enabled us to deliver a record first
quarter. In fact, our products segment realized a significant
acceleration in year-over-year growth during March, which has
further accelerated in the second quarter. During this time
of uncertainty, PetIQ continues to provide reliable access to over
1,700 pet health care items across all sales channels including
both brick-and-mortar and online. We look forward to
beginning to re-open our clinics at the end of this week in certain
markets for pet parents to have the convenient and affordable
access to pet medications and services.”
First Quarter 2020 Highlights Compared
to Prior Year Period
- Record first quarter net sales of
$186.8 million, an increase of 25.8%
- Net loss of $2.6 million, compared
to net income of $2.3 million, included $2.8 million of incremental
interest expense, and $2.4 million of additional net non-same store
loss contribution
- Adjusted net income of $4.6 million
compared to adjusted net income of $6.0 million
- Adjusted EBITDA of $14.5 million,
an increase of 33.1%
- Cash and cash equivalents of $28.1
million with total liquidity of $53.8 million, plus another $15
million of availability if the Company exercises the accordion
feature of its revolving credit facility
- 27 veterinary wellness centers were
scheduled to open in first quarter; all openings were postponed due
to COVID-19
- Announced definitive agreement to
acquire Capstar® in January 2020
COVID-19 Summary
- Product business fully operational
with manufacturing and distribution capabilities that are meeting
peak seasonal needs and uptick in demand from channel shift.
- Service locations have been
temporarily closed nationally since March 20; the reopening of
certain wellness centers will start Friday, May 8, 2020 with the
balance of the wellness centers and clinics to open in accordance
with guidance from retail partners as well as local and state
governments.
- The significant variable costs
within the service organization has minimized the impact from the
closures. The Company continues to pay its W-2 employees
two-thirds of their normal wage until re-opening. The Company
is not currently incurring any expense related to its 1099
veterinarians and percentage rent paid to host retail partners,
which are the main contributors to the services segment variable
expense structure.
- Reduced capital expenditures; new
wellness center buildouts have ceased until visibility on the
operating environment improves.
- Ample liquidity to meet working
capital needs.
First Quarter 2020 Financial Results
Net sales increased 25.8% to $186.8 million for
the first quarter of 2020, compared to $148.4 million for the same
period in the prior year. Product segment sales were $166.3 million
and Services segment revenues were $20.5 million in the first
quarter of 2020. The increase in consolidated net sales primarily
reflects growth in existing retail partners and sales contribution
from the recent Perrigo Animal Health acquisition, with an emphasis
on the Company’s prescription drug program with e-commerce partners
due to the stay-at-home orders that have changed consumer shopping
habits. The temporary suspension of the Company’s service
operations effective on March 20, 2020 partially offset this
growth.
Gross profit was $32.2 million, an increase of
30.0% compared to $24.7 million in the prior year period. Gross
margin for the quarter was 17.2% and was negatively impacted by the
reduction in service revenue in March due to the COVID-19 pandemic.
Adjusted gross profit was $35.6 million and adjusted gross margin
was 19.3% for the first quarter 2020. The GAAP gross margin
to adjusted gross margin difference of 210 basis points is a result
of the exclusion of Services segment non-same-store
contribution.
Net loss was $2.6 million, compared to net
income of $2.3 million. The change includes $2.8 million of
incremental interest expense, relating to the financing of the
Perrigo Animal Health acquisition that closed in July 2019, $1.9
million net change in non-recurring expenses, comprised of $0.5
million integration costs, $0.7 million of clinic launch expenses,
and a $0.7 million fair value adjustment to a contingent note in
the first quarter of 2019. Net income also included $4.2 million of
net non-same store loss contribution.
Adjusted net income was $4.6 million for the
first quarter of 2020 compared to $6.0 million of adjusted net
income in the prior year period.
First quarter adjusted EBITDA increased 33.0% to
$14.5 million compared to $10.9 million for the same period in the
prior year. Adjusted EBITDA margin increased 40 basis points
to 7.7% compared to 7.3% 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.
Segment Results
Products: For the first quarter of 2020, Product
segment net sales increased 31.9% to $166.3 million. Product
adjusted EBITDA increased 79.1% to $24.3 million. This
compares to Product segment sales and adjusted EBITDA of $126.1
million and $13.6 million, respectively, for the first quarter of
2019.
The Company immediately implemented its pandemic
response protocols across the organization and as a result has
minimized any plant shut-downs. In fact, all manufacturing
and distribution facilities are fully operational and have
maintained production and fill rates in excess of 99% since the
onset of COVID-19. The Company has paid incentives to its
manufacturing and distribution work force and designed and
implemented safety and cleaning protocols in all facilities to
minimize exposure and protect team members.
Services: For the first quarter of 2020,
Services segment net revenues decreased 8.3% to $20.5 million
compared to $22.4 million in the same period last year.
Services adjusted EBITDA of $2.0 million compares to $5.3 million
in the first quarter of 2019. As a result of the COVID-19
related customer traffic slowdown and temporary closure of service
operations effective March 20, 2020 revenues declined for the
quarter.
Services same store revenue decreased 12.6% in
the first quarter ended March 31, 2020. Non-same store
revenue increased 50.5% to $2.3 million for the three months ended
March 31, 2020. 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 the
same store sales base.
Prior to COVID-19, the Company was experiencing
double-digit growth in pet counts and average ticket at all
wellness centers and clinics. The estimated first quarter
Services segment impact from COVID-19 was in excess of $5.0 million
of revenue, in excess of 1,200 basis points of segment gross
margin, and approximately $3.2 million to consolidated adjusted
EBITDA. The Company anticipates that the immediate impact to
its cost structure was more significant in March following the
closure of the service operations than it will be in in the second
quarter due to the reduction in variable costs following the
closures. The variable costs associated with the clinic
operations are approximately 80% of the segment’s cost structure,
and those variable expenses were significantly reduced and will be
in effect until operations restart. This dynamic is
minimizing the financial burden near-term, while ensuring that the
services operations are ready to emerge stronger upon
re-opening. During the temporary closure, the organization
remains in touch with its more than one million pet parent
customers and is utilizing its resources to expedite the launch of
a very meaningful telemedicine platform to meet their needs during
this disruption and as an on-going offering moving forward.
The Company was on track to grand open 27
veterinary wellness centers in the first quarter of 2020.
However, those wellness center openings are now postponed due to
the COVID-19 outbreak and subsequent decision to suspend service
operations. In support of its veterinarian wellness center
expansion, the Company operated 37 regional offices as of March 31,
2020.
Balance Sheet
As of March 31, 2020, the Company had cash and
cash equivalents of $28.1 million. As previously announced, the
Company proactively utilized its Revolving Credit Facility as a
precautionary measure to provide financial flexibility given
seasonal working capital needs and the growing uncertainty in the
marketplace as a result of COVID-19. The Company’s long-term
debt balance, which is largely comprised of its revolving credit
facility and term loan, was $325.4 million as of March 31,
2020. The Company had total liquidity of approximately $53.8
million, and an additional $15 million available via an accordion
feature of the credit agreement for a total of $68.8 million.
From a working capital perspective, accounts
receivable increased $60.2 million and inventory increased $39.1
million compared to December 31, 2019, which reflects the seasonal
peak in inventory and higher receivables balances due to the mix
shift toward distributed products during the quarter.
COVID-19 Update & Full Year
Guidance
The Company previously provided its full year
2020 guidance on March 10, 2020, which did not include the impact
of COVID-19. Despite first quarter results that exceeded Company
expectations, the Company is suspending its 2020 annual guidance
due to the rapidly, evolving situation and the high degree of
uncertainty caused by the COVID-19 pandemic. The Company’s Products
segment continues to be fully operational and is generating a
further acceleration in sales to start the second quarter from the
end of the first quarter of 2020, however, the Company does not
believe that it can estimate the full financial impacts of the
pandemic with reasonable accuracy on its Services Segment. The
Company believes it has sufficient liquidity to satisfy its cash
needs, as supported by cash on hand, cash flow from operations and
access to its revolving credit facility. Long-term, the Company
remains confident in achieving its strategic and financial
objectives.
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"). 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 currently anticipates this approval to be received by
the end of second quarter 2020, with closing anticipated early in
the third quarter of
2020. Conference
Call and Webcast
The Company will host a conference call with
members of the executive management team to discuss these results
with additional comments and details. The conference call is
scheduled to begin at 4:30 p.m. ET on Thursday, May 7, 2020. To
participate on the live call listeners in North America may dial
877-300-8521 and international listeners may dial 412-317-6026.
In addition, the call will be broadcast live
over the Internet hosted at the “Investors” section of the
Company's website at www.PetIQ.com. A telephonic playback will
be available through May 28, 2020. North American listeners may
dial 844-512-2921 and international listeners may dial 412-317-6671
the passcode is 10142817.
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, the impact of COVID-19
on our business and the global economy; 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, 2019
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
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, adjusted EBITDA margin, 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, adjusted EBITDA margin,
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. |
Condensed Consolidated Balance Sheets |
(Unaudited, in 000’s except for per share
amounts) |
|
|
|
|
|
|
|
|
|
|
March 31, 2020 |
|
December 31, 2019 |
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
28,108 |
|
|
$ |
27,272 |
|
Accounts receivable, net |
|
|
131,541 |
|
|
|
71,377 |
|
Inventories |
|
|
118,738 |
|
|
|
79,703 |
|
Other current assets |
|
|
8,043 |
|
|
|
7,071 |
|
Total current assets |
|
|
286,430 |
|
|
|
185,423 |
|
Property, plant and equipment, net |
|
|
54,240 |
|
|
|
52,525 |
|
Operating lease right of use assets |
|
|
20,582 |
|
|
|
20,785 |
|
Deferred tax assets |
|
|
64,149 |
|
|
|
59,780 |
|
Other non-current assets |
|
|
3,268 |
|
|
|
3,214 |
|
Intangible assets, net |
|
|
117,621 |
|
|
|
119,956 |
|
Goodwill |
|
|
230,702 |
|
|
|
231,045 |
|
Total assets |
|
$ |
776,992 |
|
|
$ |
672,728 |
|
Liabilities and equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
78,733 |
|
|
$ |
51,538 |
|
Accrued wages payable |
|
|
6,536 |
|
|
|
9,082 |
|
Accrued interest payable |
|
|
643 |
|
|
|
83 |
|
Other accrued expenses |
|
|
5,968 |
|
|
|
3,871 |
|
Current portion of operating leases |
|
|
4,770 |
|
|
|
4,619 |
|
Current portion of long-term debt and finance leases |
|
|
3,841 |
|
|
|
3,821 |
|
Total current liabilities |
|
|
100,491 |
|
|
|
73,014 |
|
Operating leases, less current installments |
|
|
16,283 |
|
|
|
16,580 |
|
Long-term debt, less current installments |
|
|
325,432 |
|
|
|
251,376 |
|
Finance leases, less current installments |
|
|
3,225 |
|
|
|
3,331 |
|
Other non-current liabilities |
|
|
58 |
|
|
|
117 |
|
Total non-current liabilities |
|
|
344,998 |
|
|
|
271,404 |
|
Commitments and contingencies |
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Additional paid-in capital |
|
|
312,874 |
|
|
|
300,120 |
|
Class A common stock, par value $0.001 per share, 125,000 shares
authorized; 24,318 and 23,554 shares issued and outstanding,
respectively |
|
|
24 |
|
|
|
23 |
|
Class B common stock, par value $0.001 per share, 100,000 shares
authorized; 4,049 and 4,752 shares issued and outstanding,
respectively |
|
|
4 |
|
|
|
5 |
|
Accumulated deficit |
|
|
(18,006 |
) |
|
|
(15,903 |
) |
Accumulated other comprehensive loss |
|
|
(1,655 |
) |
|
|
(1,131 |
) |
Total stockholders' equity |
|
|
293,241 |
|
|
|
283,114 |
|
Non-controlling interest |
|
|
38,262 |
|
|
|
45,196 |
|
Total equity |
|
|
331,503 |
|
|
|
328,310 |
|
Total liabilities and equity |
|
$ |
776,992 |
|
|
$ |
672,728 |
|
PetIQ, Inc. |
Condensed Consolidated Statements of (Loss)
Income |
(Unaudited, in 000’s, except for per share
amounts) |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
|
|
|
Product sales |
|
$ |
166,280 |
|
|
$ |
126,084 |
|
Services revenue |
|
|
20,498 |
|
|
|
22,352 |
|
Total net sales |
|
|
186,778 |
|
|
|
148,436 |
|
Cost of products sold |
|
|
134,779 |
|
|
|
108,064 |
|
Cost of services |
|
|
19,845 |
|
|
|
15,642 |
|
Total cost of
sales |
|
|
154,624 |
|
|
|
123,706 |
|
Gross profit |
|
|
32,154 |
|
|
|
24,730 |
|
Operating expenses |
|
|
|
|
|
|
General and administrative expenses |
|
|
31,690 |
|
|
|
20,538 |
|
Contingent note revaluations gain |
|
|
— |
|
|
|
(680 |
) |
Operating income |
|
|
464 |
|
|
|
4,872 |
|
Interest expense, net |
|
|
(4,704 |
) |
|
|
(1,937 |
) |
Foreign currency gain (loss), net |
|
|
73 |
|
|
|
(122 |
) |
Other income, net |
|
|
365 |
|
|
|
13 |
|
Total other expense, net |
|
|
(4,266 |
) |
|
|
(2,046 |
) |
Pretax
net (loss) income |
|
|
(3,802 |
) |
|
|
2,826 |
|
Income
tax benefit (expense) |
|
|
1,169 |
|
|
|
(500 |
) |
Net (loss) income |
|
|
(2,633 |
) |
|
|
2,326 |
|
Net
(loss) income attributable to non-controlling interest |
|
|
(530 |
) |
|
|
715 |
|
Net
(loss) income attributable to PetIQ, Inc. |
|
$ |
(2,103 |
) |
|
$ |
1,611 |
|
Net (loss) income per
share attributable to PetIQ, Inc. Class A common
stock |
|
|
|
|
|
|
Basic |
|
$ |
(0.09 |
) |
|
$ |
0.07 |
|
Diluted |
|
$ |
(0.09 |
) |
|
$ |
0.07 |
|
Weighted Average
shares of Class A common stock outstanding |
|
|
|
|
|
|
Basic |
|
|
23,728 |
|
|
|
21,800 |
|
Diluted |
|
|
23,728 |
|
|
|
21,978 |
|
PetIQ, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited, in 000’s) |
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
March 31, |
|
|
2020 |
|
|
2019 |
|
Cash flows from operating
activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2,633 |
) |
|
$ |
2,326 |
|
Adjustments to reconcile net (loss) income to net cash used in
operating activities |
|
|
|
|
|
|
Depreciation and amortization of intangible assets and loan
fees |
|
|
5,470 |
|
|
|
3,091 |
|
Gain on disposition of property, plant, and equipment |
|
|
(375 |
) |
|
|
(34 |
) |
Stock based compensation expense |
|
|
2,558 |
|
|
|
1,544 |
|
Deferred tax adjustment |
|
|
(1,169 |
) |
|
|
500 |
|
Contingent note revaluation |
|
|
— |
|
|
|
(680 |
) |
Other non-cash activity |
|
|
33 |
|
|
|
17 |
|
Changes in assets and liabilities |
|
|
|
|
|
|
Accounts receivable |
|
|
(60,217 |
) |
|
|
(20,444 |
) |
Inventories |
|
|
(39,069 |
) |
|
|
(20,366 |
) |
Other assets |
|
|
(1,090 |
) |
|
|
21 |
|
Accounts payable |
|
|
27,827 |
|
|
|
17,335 |
|
Accrued wages payable |
|
|
(2,561 |
) |
|
|
(1,150 |
) |
Other accrued expenses |
|
|
2,620 |
|
|
|
(359 |
) |
Net
cash used in operating activities |
|
|
(68,606 |
) |
|
|
(18,199 |
) |
Cash flows from investing
activities |
|
|
|
|
|
|
Proceeds from disposition of property, plant, and equipment |
|
|
429 |
|
|
|
47 |
|
Purchase of property, plant, and equipment |
|
|
(5,075 |
) |
|
|
(897 |
) |
Net
cash used in investing activities |
|
|
(4,646 |
) |
|
|
(850 |
) |
Cash flows from financing
activities |
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
239,600 |
|
|
|
134,134 |
|
Principal payments on long-term debt |
|
|
(165,816 |
) |
|
|
(125,717 |
) |
Tax distributions to LLC Owners |
|
|
(20 |
) |
|
|
(1,378 |
) |
Principal payments on finance lease obligations |
|
|
(394 |
) |
|
|
(371 |
) |
Payment of deferred financing fees and debt discount |
|
|
— |
|
|
|
(50 |
) |
Tax withholding payments on Restricted Stock Units |
|
|
(149 |
) |
|
|
— |
|
Exercise of options to purchase class A common stock |
|
|
1,002 |
|
|
|
315 |
|
Net
cash provided by financing activities |
|
|
74,223 |
|
|
|
6,933 |
|
Net change in cash and cash equivalents |
|
|
971 |
|
|
|
(12,116 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(135 |
) |
|
|
123 |
|
Cash
and cash equivalents, beginning of period |
|
|
27,272 |
|
|
|
66,360 |
|
Cash
and cash equivalents, end of period |
|
$ |
28,108 |
|
|
$ |
54,367 |
|
PetIQ, Inc. |
Summary Segment Results |
(Unaudited, in 000’s) |
|
|
|
|
|
|
|
|
|
For the three months ended |
$'s in 000's |
|
March 31, 2020 |
|
March 31, 2019 |
Services segment sales: |
|
|
|
|
|
|
Same-store sales |
|
$ |
18,216 |
|
|
$ |
20,836 |
|
Non same-store sales |
|
|
2,282 |
|
|
|
1,516 |
|
Net services segment sales |
|
|
20,498 |
|
|
|
22,352 |
|
Products segment sales |
|
|
166,280 |
|
|
|
126,084 |
|
Total net sales |
|
|
186,778 |
|
|
|
148,436 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
Products |
|
|
24,279 |
|
|
|
13,556 |
|
Services |
|
|
1,989 |
|
|
|
5,277 |
|
Unallocated Corporate |
|
|
(11,810 |
) |
|
|
(7,961 |
) |
Total Adjusted EBITDA |
|
$ |
14,458 |
|
|
$ |
10,872 |
|
PetIQ, Inc. |
Reconciliation between gross profit and adjusted gross
profit |
(Unaudited, in 000’s) |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
Gross profit |
|
$ |
32,154 |
|
$ |
24,730 |
Plus: |
|
|
|
|
|
|
Non same-store gross loss(5) |
|
|
3,441 |
|
|
1,434 |
Adjusted gross profit |
|
$ |
35,595 |
|
$ |
26,164 |
PetIQ, Inc. |
Reconciliation between Net (Loss) Income and Adjusted
EBITDA |
(Unaudited, in 000’s) |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
Net (loss) income |
|
$ |
(2,633 |
) |
|
$ |
2,326 |
|
Plus: |
|
|
|
|
|
|
Tax (benefit) expense |
|
|
(1,169 |
) |
|
|
500 |
|
Depreciation |
|
|
2,873 |
|
|
|
1,654 |
|
Amortization |
|
|
2,242 |
|
|
|
1,279 |
|
Interest |
|
|
4,704 |
|
|
|
1,937 |
|
EBITDA |
|
$ |
6,017 |
|
|
$ |
7,696 |
|
Acquisition costs(1) |
|
|
586 |
|
|
|
576 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
454 |
|
|
|
— |
|
Stock based compensation expense |
|
|
2,558 |
|
|
|
1,544 |
|
Fair value adjustment of contingent note(3) |
|
|
— |
|
|
|
(680 |
) |
Non same-store revenue(4) |
|
|
(2,282 |
) |
|
|
(1,516 |
) |
Non same-store costs(4) |
|
|
6,400 |
|
|
|
3,252 |
|
Clinic launch expenses(5) |
|
|
676 |
|
|
|
— |
|
Litigation expenses |
|
|
49 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
14,458 |
|
|
$ |
10,872 |
|
Adjusted EBITDA Margin |
|
7.7% |
|
7.3% |
(1) |
|
Acquisition costs include legal, accounting, banking, consulting,
diligence, and other out-of-pocket costs related to completed and
contemplated acquisitions. |
|
|
|
(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. |
|
|
|
(3) |
|
Fair
value adjustment on the contingent note represents the non cash
adjustment to mark the 2019 Contingent Note to fair value. |
|
|
|
(4) |
|
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. |
|
|
|
(5) |
|
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. |
PetIQ, Inc. |
Reconciliation between net (loss) income and adjusted net
income |
(Unaudited, in 000’s) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
Net (loss) income |
|
$ |
(2,633 |
) |
|
$ |
2,326 |
|
Plus: |
|
|
|
|
|
|
Tax expense (benefit) |
|
|
(1,169 |
) |
|
|
500 |
|
Acquisition costs(1) |
|
|
586 |
|
|
|
576 |
|
Integration costs and costs of discontinued clinics(2) |
|
|
454 |
|
|
|
— |
|
Stock based compensation expense |
|
|
2,558 |
|
|
|
1,544 |
|
Fair value adjustment of contingent note(3) |
|
|
— |
|
|
|
(680 |
) |
Non same-store revenue(4) |
|
|
(2,282 |
) |
|
|
(1,516 |
) |
Non same-store costs(4) |
|
|
6,400 |
|
|
|
3,252 |
|
Clinic launch expenses(5) |
|
|
676 |
|
|
|
— |
|
Litigation expenses |
|
|
49 |
|
|
|
— |
|
Adjusted Net income |
|
$ |
4,639 |
|
|
$ |
6,002 |
|
(1) |
|
Acquisition costs include legal, accounting, banking, consulting,
diligence, and other out-of-pocket costs related to completed and
contemplated acquisitions. |
|
|
|
(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. |
|
|
|
(3) |
|
Fair
value adjustment on the contingent note represents the non cash
adjustment to mark the 2019 Contingent Note to fair value. |
|
|
|
(4) |
|
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. |
|
|
|
(5) |
|
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. |
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