EAGLE, Idaho, Nov. 03, 2021 (GLOBE NEWSWIRE) -- 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, 2021.
Cord Christensen, PetIQ’s Chairman & CEO commented, “We are very pleased with our record third quarter results. The Product segment returned to a more normal sales cadence, and we increased market share on our core manufactured items for the third consecutive quarter this year, helping to fuel the Company’s profitability. Our net sales growth was led by the e-commerce sales channel with an increase of 51% year-over-year and strong contribution from the Company’s manufactured brands, driven by the flea and tick category and our health and wellness portfolio.”
Christensen continued, “The Services segment also had a solid quarter with double digit growth in pets per clinic and dollars per pet, despite not operating a significant percentage of our clinics due to labor headwinds. Going forward, we continue to expect the strength of our diversified business model to fuel our growth as we deliver smarter options for pet parents to help enrich their pet’s lives through convenient and affordable access to veterinarian products and services.”
Third Quarter 2021 Highlights Compared to Prior Year Period
- Record net sales of $210.5 million compared to $162.1 million, an increase of 29.9%
- Product segment net sales of $181.6 million compared to $150.1 million, an increase of 21.0%
- Product segment adjusted EBITDA of $33.7 million compared to $26.3 million, an increase of 28.0%
- Product segment adjusted EBITDA margin of 18.5%, an increase of 100 basis points
- Services segment net revenues of $29.0 million compared to $12.0 million, an increase of $17.0 million
- Services segment adjusted EBITDA of $3.8 million compared to an adjusted EBITDA loss of $0.2 million
- Gross margin increased 10 basis points to 20.0%; adjusted gross margin increased 20 basis points to 22.6%
- Net loss, adjusted net income and adjusted EBITDA for the third quarter of 2021 includes a $2.0 million R&D milestone payment accrual for a future over-the-counter pet medication launch
- Net loss of $8.3 million compared to a net loss of $71.5 million
- Adjusted net income of $2.4 million compared to an adjusted net loss of $1.3 million
- Adjusted EBITDA of $16.4 million compared to $12.0 million, an increase of 36.3%
- Adjusted EBITDA margin increased 40 basis points to 7.8%
- 12 new wellness center openings in the third quarter of 2021
Nine Month 2021 Highlights Compared to Prior Year Period
- Record net sales of $735.9 million compared to $615.8 million, an increase of 19.5%
- Product segment net sales of $654.4 million compared to $580.7 million, an increase of 12.7%
- Product segment adjusted EBITDA of $120.7 million compared to $92.4 million, an increase of 30.5%
- Product segment adjusted EBITDA margin of 18.4%, an increase of 250 basis points
- Services segment net revenues of $81.4 million compared to $35.2 million, an increase of $46.3 million
- Services segment adjusted EBITDA was $8.9 million compared to $2.9 million, an increase of $6.1 million
- Gross margin increased 300 basis points to 20.3%; adjusted gross margin increased 310 basis points to 22.5%
- Net loss was $1.9 million compared to a net loss of $75.6 million
- Adjusted net income of $31.8 million compared to adjusted net income of $21.1 million, an increase of 50.6%
- Adjusted EBITDA of $77.6 million compared to $54.8 million, an increase of 41.7%
- Adjusted EBITDA margin increased 180 basis points to 10.8%
- 72 new wellness center openings in the first nine months of 2021
Third Quarter 2021 Financial Results
Record net sales of $210.5 million for the third quarter of 2021, increased 29.9%, compared to $162.1 million for the same period in the prior year.
Third quarter net sales were driven by growth in both the Products and Services segments. The Products segment benefited from a robust flea and tick season with broad-based growth across all categories. The Services segment benefited from the reopening of its wellness centers and mobile clinics as compared to the prior year period, despite experiencing labor-related headwinds in the third quarter of 2021. Product segment sales were $181.6 million and Services segment revenues were $29.0 million in the third quarter of 2021.
Third quarter 2021 gross profit was $42.1 million, an increase of 30.4% compared to $32.3 million in the prior year period. Gross margin increased 10 basis points to 20.0% from 19.9% in the prior year period. Adjusted gross profit was $45.9 million compared to $35.6 million in the prior year period, which reflects the growth in sales of manufactured items such as Capstar®. Adjusted gross margin increased 20 basis points to 22.6% for the third quarter 2021 compared to 22.4% in the prior year period.
Net loss, adjusted net income and adjusted EBITDA for the third quarter of 2021 includes a $2.0 million R&D milestone payment accrual for a future over-the-counter pet medication launch within the Company’s general and administrative expenses.
Net loss was $8.3 million for the third quarter of 2021 compared to a net loss of $71.5 million in the prior year period. The improvement in net loss was driven by a favorable shift in sales mix to the Company’s manufactured products and the reopening of wellness centers and community clinics as compared to the prior year period, partially offset by the aforementioned R&D milestone payment accrual and an accrual for legal settlements of $2.3 million. The third quarter of 2020 net loss was primarily due a $53.2 million tax expense driven by a non-cash tax valuation allowance on the Company’s deferred tax assets. Adjusted net income was $2.4 million an improvement compared to an adjusted net loss of $1.3 million in the prior year period.
Third quarter adjusted EBITDA was $16.4 million, an increase of 36.3%, compared to $12.0 million in the prior year period. The Adjusted EBITDA increase was driven by the gross profit contributed from the Products segment and a return to positive contribution for the Services segment, partially offset by the aforementioned R&D milestone payment accrual. Adjusted EBITDA margin increased 40 basis points to 7.8% compared to 7.4% in the prior year period.
Adjusted gross profit, adjusted gross margin, adjusted G&A, adjusted net income, adjusted net loss, adjusted EBITDA, and adjusted EBITDA margin 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, including the increase of manufacturing operations as a result of the Perrigo Animal Health Acquisition and the Capstar® 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
Product:
For the third quarter of 2021, Product segment net sales increased 21.0% to $181.6 million. For comparative purposes, net sales increased 33%, excluding sales from a major animal health manufacturer that is no longer included in the base. The third quarter increase in net sales was driven by broad-based growth across all product categories led by the flea and tick and health and wellness categories with an increase of 16% and 24%, respectively as compared to the prior year period. The e-commerce sales channel was increased 51% as compared to the third quarter last year, led by the Company’s manufactured brands that increased 76% when compared to the same period last year.
Product adjusted EBITDA increased 28.0% to $33.7 million, representing an adjusted EBITDA margin increase of 100 basis points to 18.5% compared to the prior year period. Product segment net sales and adjusted EBITDA benefited from an increased sales mix of manufactured products, and overall better year-over-year growth as compared to the prior year, partially offset by higher prescription drug product sales. This compares to Product segment sales and adjusted EBITDA of $150.1 million and $26.3 million, respectively, for the third quarter of 2020.
For the first nine months of 2021 Product segment net sales of $654.4 million compared to $580.7 million for the prior year period, an increase of 12.7%. Product adjusted EBITDA increased 30.5% to $120.7 million, representing an adjusted EBITDA margin of 18.4%, an increase of 250 basis points.
Services:
For the third quarter of 2021, Services segment net revenues were $29.0 million, an increase of $17.0 million, compared to $12.0 million in the same period last year. The increase in Services segment net revenues was driven by the re-opening of wellness centers and mobile clinics as compared to the prior year period, despite experiencing labor-related headwinds in the third quarter of 2021. Services segment adjusted EBITDA was $3.8 million compared to an adjusted EBITDA loss of $0.2 million in the third quarter of 2020.
For the first nine months of 2021 Services Segment net revenues were $81.4 million compared to $35.2 million for the prior year period, an increase of $46.3 million. Services segment adjusted EBITDA increased $6.1 million to $8.9 million for the first nine months of 2021 compared to $2.8 million for the prior year period.
Cash Flow and Balance Sheet
As of September 30, 2021, the Company had cash and cash equivalents of $63.2 million. The Company’s long-term debt balance, which is largely comprised of its revolving credit facility, term loan and convertible debt, was $438.4 million as of September 30, 2021. The Company entered into new $425 million credit facilities, replacing existing facilities in April 2021. The credit facilities provide more favorable terms including a 125-basis point decrease in the Company’s annual interest rate on its term loan and greater financial flexibility to support future growth, representing total liquidity of $188.2 million as of September 30, 2021.
Working capital increased to $197.7 million as of September 30, 2021, and increase of $56.2 million from December 31, 2020, primarily as a result of normal working capital increases in accounts receivable and inventory given the seasonality of the business and the timing of new product launches.
Outlook
The Company expects to open approximately 100 new wellness centers in 2021 compared to its previously stated plan to open 130 to 170. The Company plans to begin construction on new wellness centers once all required in-center labor is hired given the current labor market. While the Company’s outlook remains suspended due to the uncertainty from potential COVID-19 and Delta-variant related impacts to its business, it continues to have record year-over-year net sales and adjusted EBITDA results. The Company is optimistic the Services segment will continue to generate significant improvements to its operations in the fourth quarter of 2021. As the impacts to the Company’s Services segment lessen and become more predictable, it will then be in a better position to provide formal guidance.
For the Products segment, the Company maintains its strong visibility to another year of solid sales growth and Adjusted EBITDA margin expansion. The Company continues to expect full year 2021 incremental EBITDA contribution from Capstar® of greater than $20 million. Long-term, the Company remains confident in achieving its strategic and financial objectives.
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 today at 4:30 p.m. ET. To participate on the live call listeners in North America may dial 877-451-6152 and international listeners may dial 201-389-0879.
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 November 24, 2021. North American listeners may dial 844-512-2921 and international listeners may dial 412-317-6671; the passcode is 13724486.
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 and 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 42 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.
Contact: Investor.relations@petiq.com or 208.513.1513
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, 2020 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 gross margin, adjusted G&A, adjusted EBITDA, and adjusted EBITDA margin.
Adjusted net (loss) income consists of net (loss) income adjusted for tax expense, acquisition expenses, integration costs and costs of discontinued clinics, new clinic launch expense, non-same-store revenue, non-same-store costs, litigation costs, loss on debt extinguishment, stock-based compensation expense, CFO transition and COVID-19 related costs. Adjusted (loss) net income is utilized by management: to evaluate the effectiveness of our business strategies.
Adjusted gross profit consists of gross profit adjusted for gross loss on veterinarian clinics and wellness centers that are not part of same store sales and COVID related costs. Adjusted gross profit is utilized by management to evaluate the effectiveness of our business strategies.
Adjusted G&A consists of G&A adjusted for acquisition expense, stock compensation expense, non-same store G&A, integrations expense, clinic launch expense, COVID related costs, loss on debt extinguishment and related costs, litigation expense and CFO transition costs.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. EBITDA represents net income (loss) 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 (loss) income, adjusted gross profit, adjusted gross margin, adjusted general and administrative expenses (Adjusted G&A), 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 G&A, 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 (loss) income, adjusted gross profit, adjusted gross margin, adjusted G&A, 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 (loss) income, adjusted gross profit, adjusted G&A, adjusted EBITDA and adjusted EBITDA margin in the same manner. Our management does not, and you should not, consider adjusted net (loss) income, adjusted gross profit, adjusted gross margin, adjusted G&A, 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 (loss) income, adjusted gross profit, adjusted gross margin, adjusted G&A, 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
- Community clinic – A 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 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.
- Wellness center – A wellness center is a physical fixed service location within the existing footprint of one of our retail partners. These 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 veterinarian community clinics and wellness centers. These offices are staffed with field management and other operational staff.
| PetIQ, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Unaudited, in 000’s except for per share amounts) | ||||||||
| As adjusted (Note1) | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 63,174 | $ | 33,456 | ||||
| Accounts receivable, net | 124,270 | 102,755 | ||||||
| Inventories | 108,144 | 97,773 | ||||||
| Other current assets | 7,157 | 8,312 | ||||||
| Total current assets | 302,745 | 242,296 | ||||||
| Property, plant and equipment, net | 74,346 | 63,146 | ||||||
| Operating lease right of use assets | 20,940 | 20,122 | ||||||
| Other non-current assets | 2,134 | 1,870 | ||||||
| Intangible assets, net | 195,310 | 213,000 | ||||||
| Goodwill | 231,083 | 231,158 | ||||||
| Total assets | $ | 826,558 | $ | 771,592 | ||||
| Liabilities and equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 62,510 | $ | 68,131 | ||||
| Accrued wages payable | 13,179 | 10,540 | ||||||
| Accrued interest payable | 5,108 | 903 | ||||||
| Other accrued expenses | 10,829 | 8,815 | ||||||
| Current portion of operating leases | 5,891 | 4,915 | ||||||
| Current portion of long-term debt and finance leases | 7,497 | 7,763 | ||||||
| Total current liabilities | 105,014 | 101,067 | ||||||
| Operating leases, less current installments | 15,857 | 15,789 | ||||||
| Long-term debt, less current installments | 438,406 | 403,591 | ||||||
| Finance leases, less current installments | 2,378 | 3,338 | ||||||
| Other non-current liabilities | 1,712 | 1,397 | ||||||
| Total non-current liabilities | 458,353 | 424,115 | ||||||
| Equity | ||||||||
| Additional paid-in capital | 361,836 | 319,642 | ||||||
| Class A common stock, par value $0.001 per share, 125,000 shares authorized; 29,065 and 25,711 shares issued and outstanding, respectively | 29 | 26 | ||||||
| Class B common stock, par value $0.001 per share, 100,000 shares authorized; 292 and 3,040 shares issued and outstanding, respectively | — | 3 | ||||||
| Accumulated deficit | (100,401 | ) | (98,558 | ) | ||||
| Accumulated other comprehensive loss | (825 | ) | (686 | ) | ||||
| Total stockholders' equity | 260,639 | 220,427 | ||||||
| Non-controlling interest | 2,552 | 25,983 | ||||||
| Total equity | 263,191 | 246,410 | ||||||
| Total liabilities and equity | $ | 826,558 | $ | 771,592 | ||||
(1) – Amounts adjusted for adoption of ASU 2020-06
| PetIQ, Inc. | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited, in 000’s, except for per share amounts) | ||||||||||||||||
| As adjusted (Note1) | As adjusted (Note1) | |||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
| Product sales | $ | 181,557 | $ | 150,063 | $ | 654,448 | $ | 580,650 | ||||||||
| Services revenue | 28,977 | 12,020 | 81,444 | 35,193 | ||||||||||||
| Total net sales | 210,534 | 162,083 | 735,892 | 615,843 | ||||||||||||
| Cost of products sold | 142,009 | 116,847 | 510,673 | 469,095 | ||||||||||||
| Cost of services | 26,453 | 12,968 | 75,720 | 40,142 | ||||||||||||
| Total cost of sales | 168,462 | 129,815 | 586,393 | 509,237 | ||||||||||||
| Gross profit | 42,072 | 32,268 | 149,499 | 106,606 | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | 45,252 | 35,562 | 129,066 | 105,744 | ||||||||||||
| Operating income (loss) | (3,180 | ) | (3,294 | ) | 20,433 | 862 | ||||||||||
| Interest expense, net | (6,168 | ) | (6,427 | ) | (18,693 | ) | (16,460 | ) | ||||||||
| Foreign currency (loss) income, net | 6 | (251 | ) | (98 | ) | (126 | ) | |||||||||
| Loss on debt extinguishment | — | — | (5,453 | ) | — | |||||||||||
| Other income, net | 1,331 | 13 | 2,090 | 702 | ||||||||||||
| Total other expense, net | (4,831 | ) | (6,665 | ) | (22,154 | ) | (15,884 | ) | ||||||||
| Pretax net loss | (8,011 | ) | (9,959 | ) | (1,721 | ) | (15,022 | ) | ||||||||
| Income tax expense | (317 | ) | (61,563 | ) | (187 | ) | (60,582 | ) | ||||||||
| Net loss | (8,328 | ) | (71,522 | ) | (1,908 | ) | (75,604 | ) | ||||||||
| Net loss attributable to non-controlling interest | (426 | ) | (1,272 | ) | (65 | ) | (1,775 | ) | ||||||||
| Net loss attributable to PetIQ, Inc. | $ | (7,902 | ) | $ | (70,250 | ) | $ | (1,843 | ) | $ | (73,829 | ) | ||||
| Net loss per share attributable to PetIQ, Inc. Class A common stock | ||||||||||||||||
| Basic | $ | (0.27 | ) | $ | (2.82 | ) | $ | (0.07 | ) | $ | (3.03 | ) | ||||
| Diluted | $ | (0.27 | ) | $ | (2.82 | ) | $ | (0.07 | ) | $ | (3.03 | ) | ||||
| Weighted Average shares of Class A common stock outstanding | ||||||||||||||||
| Basic | 28,940 | 24,935 | 27,949 | 24,365 | ||||||||||||
| Diluted | 28,940 | 24,935 | 27,949 | 24,365 | ||||||||||||
(1) – Amounts adjusted for adoption of ASU 2020-06
| PetIQ, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited, in 000’s) | ||||||||
| For the Nine Months Ended September 30, | ||||||||
| As adjusted (Note1) | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (1,908 | ) | $ | (75,604 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Depreciation and amortization of intangible assets and loan fees | 28,936 | 18,902 | ||||||
| Loss on debt extinguishment | 5,453 | — | ||||||
| Gain on disposition of property, plant, and equipment | (1,185 | ) | (363 | ) | ||||
| Stock based compensation expense | 7,188 | 6,549 | ||||||
| Deferred tax adjustment | — | 60,582 | ||||||
| Termination of supply agreement | — | 7,801 | ||||||
| Other non-cash activity | 133 | 143 | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (21,910 | ) | (29,777 | ) | ||||
| Inventories | (10,040 | ) | (3,993 | ) | ||||
| Other assets | (883 | ) | 3,449 | |||||
| Accounts payable | (4,498 | ) | 15,824 | |||||
| Accrued wages payable | 2,664 | 3,443 | ||||||
| Other accrued expenses | 6,515 | 6,863 | ||||||
| Net cash provided by operating activities | 10,465 | 13,819 | ||||||
| Cash flows from investing activities | ||||||||
| Proceeds from disposition of property, plant, and equipment | 5,055 | 429 | ||||||
| Purchase of property, plant, and equipment | (24,577 | ) | (16,811 | ) | ||||
| Purchase of Capstar and related intangibles | — | (96,072 | ) | |||||
| Net cash used in investing activities | (19,522 | ) | (112,454 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of convertible notes | — | 143,750 | ||||||
| Payment for Capped Call options | — | (14,821 | ) | |||||
| Proceeds from issuance of long-term debt | 630,568 | 668,675 | ||||||
| Principal payments on long-term debt | (595,321 | ) | (668,511 | ) | ||||
| Payment of financing fees on Convertible Notes | — | (5,884 | ) | |||||
| Tax distributions to LLC Owners | (70 | ) | (46 | ) | ||||
| Principal payments on finance lease obligations | (1,573 | ) | (1,252 | ) | ||||
| Payment of deferred financing fees and debt discount | (6,454 | ) | (550 | ) | ||||
| Tax withholding payments on Restricted Stock Units | (901 | ) | (313 | ) | ||||
| Exercise of options to purchase class A common stock | 12,617 | 8,188 | ||||||
| Net cash provided by financing activities | 38,866 | 129,236 | ||||||
| Net change in cash and cash equivalents | 29,809 | 30,601 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (91 | ) | (120 | ) | ||||
| Cash and cash equivalents, beginning of period | 33,456 | 27,272 | ||||||
| Cash and cash equivalents, end of period | $ | 63,174 | $ | 57,753 | ||||
(1) – Amounts adjusted for adoption of ASU 2020-06
| 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, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||
| Services segment sales: | |||||||||||||||
| Same-store sales | $ | 21,732 | $ | 9,136 | $ | 63,822 | $ | 29,074 | |||||||
| Non same-store sales | 7,245 | 2,884 | 17,622 | 6,119 | |||||||||||
| Net services segment sales | 28,977 | 12,020 | 81,444 | 35,193 | |||||||||||
| Products segment sales | 181,557 | 150,063 | 654,448 | 580,650 | |||||||||||
| Total net sales | 210,534 | 162,083 | 735,892 | 615,843 | |||||||||||
| Adjusted EBITDA | |||||||||||||||
| Products | 33,678 | 26,318 | 120,657 | 92,448 | |||||||||||
| Services | 3,821 | (223 | ) | 8,945 | 2,878 | ||||||||||
| Unallocated Corporate | (21,135 | ) | (14,088 | ) | (52,018 | ) | (40,555 | ) | |||||||
| Total Adjusted EBITDA | $ | 16,364 | $ | 12,007 | $ | 77,584 | $ | 54,771 | |||||||
| 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, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||
| Gross profit | $ | 42,072 | $ | 32,268 | $ | 149,499 | $ | 106,606 | |||||||
| Plus: | |||||||||||||||
| Non same-store gross loss(3) | 3,861 | 2,137 | 11,805 | 7,660 | |||||||||||
| COVID-19 related costs(6) | — | 1,182 | — | 4,178 | |||||||||||
| Adjusted gross profit | $ | 45,933 | $ | 35,587 | $ | 161,304 | $ | 118,444 | |||||||
| Adjusted gross margin | 22.6% | 22.4% | 22.5% | 19.4% | |||||||||||
| PetIQ, Inc. | |||||||||||||||
| Reconciliation between G&A and adjusted G&A | |||||||||||||||
| (Unaudited, in 000’s) | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||
| General and Administrative expenses | $ | 45,252 | $ | 35,562 | $ | 129,066 | $ | 105,744 | |||||||
| Less: | |||||||||||||||
| Acquisition costs(1) | — | 1,083 | 92 | 1,815 | |||||||||||
| Loss on extinguishment and related costs(2) | — | — | 985 | — | |||||||||||
| Stock based compensation expense | 2,627 | 2,147 | 7,188 | 6,549 | |||||||||||
| Non same-store general and administrative expenses(3) | 1,488 | 357 | 2,999 | 1,697 | |||||||||||
| Integration costs(4) | (1,041 | ) | 307 | (354 | ) | 9,611 | |||||||||
| Clinic launch expenses(5) | 846 | 767 | 2,126 | 2,046 | |||||||||||
| Litigation expenses | 2,323 | 290 | 2,886 | 723 | |||||||||||
| CFO Transition | 331 | — | 331 | — | |||||||||||
| COVID-19 related costs(6) | — | 418 | — | 1,855 | |||||||||||
| Adjusted G&A | $ | 38,678 | $ | 30,193 | $ | 112,813 | $ | 81,448 | |||||||
| PetIQ, Inc. | |||||||||||||||
| Reconciliation between Net (Loss) Income and Adjusted EBITDA | |||||||||||||||
| (Unaudited, in 000’s) | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||
| Net income (loss) | $ | (8,328 | ) | $ | (71,522 | ) | $ | (1,908 | ) | $ | (75,604 | ) | |||
| Plus: | |||||||||||||||
| Tax expense | 317 | 61,563 | 187 | 60,582 | |||||||||||
| Depreciation | 3,145 | 3,030 | 9,419 | 8,886 | |||||||||||
| Amortization | 4,627 | 3,821 | 17,682 | 8,313 | |||||||||||
| Interest | 6,168 | 6,427 | 18,693 | 16,460 | |||||||||||
| EBITDA | $ | 5,929 | $ | 3,319 | $ | 44,073 | $ | 18,637 | |||||||
| Acquisition costs(1) | — | 1,083 | 92 | 1,815 | |||||||||||
| Loss on extinguishment and related costs(2) | — | — | 6,438 | — | |||||||||||
| Stock based compensation expense | 2,627 | 2,147 | 7,188 | 6,549 | |||||||||||
| Non same-store revenue(3) | (7,245 | ) | (2,884 | ) | (17,622 | ) | (6,119 | ) | |||||||
| Non same-store costs(3) | 12,594 | 5,378 | 32,426 | 15,476 | |||||||||||
| Integration costs(4) | (1,041 | ) | 307 | (354 | ) | 9,611 | |||||||||
| Clinic launch expenses(5) | 846 | 767 | 2,126 | 2,046 | |||||||||||
| Litigation expenses | 2,323 | 290 | 2,886 | 723 | |||||||||||
| CFO Transition | 331 | — | 331 | — | |||||||||||
| COVID-19 related costs(6) | — | 1,600 | — | 6,033 | |||||||||||
| Adjusted EBITDA | $ | 16,364 | $ | 12,007 | $ | 77,584 | $ | 54,771 | |||||||
| Adjusted EBITDA Margin | 7.8% | 7.4% | 10.8% | 9.0% | |||||||||||
| (1) | Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions. |
| (2) | Loss on debt extinguishment and related costs are related to our entering into two new credit facilities, including the write off of deferred financing costs and related out of pocket costs. |
| (3) | 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. |
| (4) | Integration costs 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. Additionally, integration costs include the gain on the sale of our previous headquarters. |
| (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. |
| (6) | Costs related to maintaining service segment infrastructure, staffing, and overhead related clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID. |
| PetIQ, Inc. | |||||||||||||||
| Reconciliation between net income (loss) and adjusted net (loss) income | |||||||||||||||
| (Unaudited, in 000’s) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||
| Net income (loss) | $ | (8,328 | ) | $ | (71,522 | ) | $ | (1,908 | ) | $ | (75,604 | ) | |||
| Plus: | |||||||||||||||
| Tax expense (benefit) | 317 | 61,563 | 187 | 60,582 | |||||||||||
| Acquisition costs(1) | — | 1,083 | 92 | 1,815 | |||||||||||
| Loss on extinguishment and related costs(2) | — | — | 6,438 | — | |||||||||||
| Stock based compensation expense | 2,627 | 2,147 | 7,188 | 6,549 | |||||||||||
| Non same-store revenue(3) | (7,245 | ) | (2,884 | ) | (17,622 | ) | (6,119 | ) | |||||||
| Non same-store costs(3) | 12,594 | 5,378 | 32,426 | 15,476 | |||||||||||
| Integration costs(4) | (1,041 | ) | 307 | (354 | ) | 9,611 | |||||||||
| Clinic launch expenses(5) | 846 | 767 | 2,126 | 2,046 | |||||||||||
| Litigation expenses | 2,323 | 290 | 2,886 | 723 | |||||||||||
| CFO Transition | 331 | — | 331 | — | |||||||||||
| COVID-19 related costs(6) | — | 1,600 | — | 6,033 | |||||||||||
| Adjusted Net income | $ | 2,424 | $ | (1,271 | ) | $ | 31,790 | $ | 21,112 | ||||||
| (1) | Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions. |
| (2) | Loss on debt extinguishment and related costs are related to our entering into two new credit facilities, including the write off of deferred financing costs and related out of pocket costs. |
| (3) | 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. |
| (4) | Integration costs 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. Additionally, integration costs include the gain on the sale of our previous headquarters. |
| (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. |
| (6) | Costs related to maintaining service segment infrastructure, staffing, and overhead related clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID. |
