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,
2023.
Cord Christensen, PetIQ’s Chairman & CEO commented, “We are
pleased to report the highest third quarter financial results in
the history of the Company. We generated growth significantly above
our guidance resulting in strong third quarter 2023 cash generation
and record low net leverage. We’ve made important strategic
decisions to help us increase operating efficiencies and focus our
spending on the areas of our business where we are seeing the most
favorable returns. PetIQ’s product portfolio continued to
experience increased consumption and gain market share in the
quarter, evidence that our strategic marketing initiatives are
working, and we expect to lean in on these initiatives heading into
next year to support the long-term success of our brands. We have
an incredible team executing at a high-level that have helped to
fuel our record results and ability to raise the Company's full
year 2023 outlook.”
Third Quarter 2023 Highlights Compared to Prior Year
Period
- Record net sales of $277.0 million, an increase of 32.1%, and
above the Company’s guidance for the quarter of $220.0 million to
$240.0 million
- Products segment net sales of $239.7 million compared to $176.2
million, an increase of 36.0%
- Services segment net revenues of $37.4 million compared to
$33.5 million, an increase of 11.5%
- Gross profit was $72.6 million compared to $50.8 million, an
increase of 43.0%
- Gross margin increased 200 basis points to 26.2%
- Net income of $0.5 million, or earnings per diluted share
("EPS") of $0.02, compared to net loss of $49.6 million, or loss
per share of $1.68
- Adjusted net income of $12.6 million, an increase of $11.8
million, or adjusted EPS of $0.42, compared to adjusted net income
of $0.8 million, or adjusted EPS of $0.03
- EBITDA of $24.7 million compared to $12.8 million, an increase
of 93.2%
- Adjusted EBITDA of $29.3 million compared to $16.3 million, an
increase of 80.0% and above the Company's guidance for the quarter
of $18.0 million to $20.0 million
- Adjusted EBITDA margin increased 280 basis points to 10.6%
- Third quarter cash from operations of $50.3 million
- Net leverage as measured under the Company's credit agreement
was 2.8x as of September 30, 2023, compared to 4.3x as of September
30, 2022
- Collaborated with Walmart, an existing partner, on a new, pilot
wellness center to offer a variety of pet services, including
veterinary care, grooming and hygiene care opened in late
September
Nine Month 2023 Highlights Compared to Prior Year
Period
- Net sales of $882.0 million, an increase of 19.6%
- Products segment net sales of $776.8 million compared to $643.0
million, an increase of 20.8%
- Services segment net revenues of $105.2 million compared to
$94.5 million, an increase of 11.4%
- Gross profit was $208.8 million compared to $170.4 million, an
increase of 22.5%
- Gross margin increased 60 basis points to 23.7%
- Net income of $19.8 million, or EPS of $0.67, compared to net
loss of $41.7 million, or loss per share of $1.42
- Adjusted net income of $40.1 million, or adjusted EPS of $1.36,
an increase of 91.5%, compared to adjusted net income of $20.7
million, or adjusted EPS of $0.71
- EBITDA of $80.7 million compared to $50.0 million, an increase
of 61.4%
- Adjusted EBITDA of $92.8 million compared to $64.8 million, an
increase of 43.1%
Services Segment OptimizationLate in the third
quarter of 2023, the Company initiated a Services segment
optimization to improve future profitability which is expected to
generate approximately $6.0 million of net cost savings over the
next 12 months, all of which, the Company expects to reinvest in
its future growth, focusing primarily on areas the Company
continues to experience a favorable return on investment, including
its mobile community clinics and sales and marketing initiatives
for PetIQ's manufactured brands. The optimization included
assessing the operational and financial performance of the
Company's wellness centers since re-opening after the pandemic as
well as the assessment of the veterinary labor market in each
geographic market. The Company also evaluated its ability to
potentially convert these locations to a more hygiene-focused
offering and determined they would be unable to convert these
locations in the future based on the aforementioned assessment and
the available square footage within the respective wellness
centers. As a result of the optimization, the Company identified
149 underperforming wellness centers for closure. The Company
closed 45 wellness centers during the third quarter and expects to
close the remaining 104 wellness centers in the fourth quarter
ending December 31, 2023. The Company ended the third quarter of
2023 with 237 wellness centers and expects to end 2023 with 133
wellness centers.
Christensen continued, “We believe our Services optimization
will be executed swiftly in the fourth quarter of 2023 and result
in a significantly stronger, more profitable segment that is better
positioned for future growth. Over the last 18 months we’ve evolved
our services offering based on changes in the pet health care and
veterinarian labor market, achieved greater operational
efficiencies, and aligned investments in areas of our business
where we are seeing the highest rate of returns. Our mobile
community clinics fueled solid growth driven by our ability to
operate more clinics than the prior year period as our team
successfully matched contract veterinarian labor with pet demand.
In addition, we are pleased with the initial results from the
wellness centers that are testing hygiene, grooming and additional
services. Going forward, we will remain prudent with our wellness
center growth and remain optimistic about our ability to increase
the number of pets served and dollars per pet.”
Third Quarter 2023 Financial ResultsNet sales
were $277.0 million for the third quarter of 2023, an increase of
32.1% compared to net sales of $209.7 million in the prior year
period, driven by an increase in sales from both the Products and
Services segments. Products segment net sales of $239.7 million
increased 36.0% compared to the prior year period reflecting
broad-based growth across product categories and sales channels as
well as from the previously announced acquisition of Rocco &
Roxie LLC ("Rocco & Roxie") completed in January 2023. The
Company experienced continued strength across flea and tick,
prescription medication, and health and wellness product offerings
with favorable consumption trends. Net sales for PetIQ’s
manufactured products outperformed the Company's growth
expectations for the third quarter of 2023 as compared to the prior
year period with an increase of 41.7% including the acquisition of
Rocco & Roxie, or an increase of 27.0%, on an organic basis.
Services revenue for the third quarter of 2023 increased 11.5% to
$37.4 million driven by operational improvements.
Third quarter 2023 gross profit was $72.6 million, an increase
of 43.0%, compared to $50.8 million in the prior year period. Gross
margin increased 200 basis points to 26.2% from 24.2% in the prior
year period as the Company benefited from operating leverage on
higher net sales and increased manufacturing efficiencies as well
as a favorable shift in product mix.
Selling, general and administrative expenses (“SG&A”) were
$55.0 million for the third quarter of 2023 compared to $46.0
million in the prior year period. As a percentage of net sales,
SG&A was 19.9% for the third quarter of 2023, a decrease of 210
basis points compared to the prior year period. Adjusted SG&A
was $51.7 million for the third quarter of 2023 compared to $42.5
million in the prior year period. As a percentage of net sales
adjusted SG&A was 18.6%, a decrease of 160 basis points
compared to the prior year period. The leverage in SG&A and
adjusted SG&A was primarily due to continued leverage of costs
and increased business expense efficiencies relative to the growth
in net sales, partially offset by increased corporate compensation
expense, increased advertising and promotional expense to support
PetIQ's manufactured products, and increased expenses associated
with Rocco & Roxie as compared to the third quarter of
2022.
Restructuring and related charges attributable to the Services
segment optimization were $8.5 million for the third quarter ended
September 30, 2023. The Company expects total restructuring and
related charges of approximately $14.6 million for the year
ending December 31, 2023, including approximately
$11.0 million of depreciation and amortization as well as $0.3
million inventory valuation adjustments. The Company also expects
to settle its lease obligations of approximately $3.0 million
in the fourth quarter of 2023. The lease settlement obligations are
not expected to result in an expense to the Company's consolidated
statements of operations as the liabilities are currently reflected
on its balance sheet as of September 30, 2023. Accordingly, the
total cash expenditures related to the Services segment
optimization are expected to be approximately
$6.3 million.
Third quarter 2023 net income was $0.5 million, and EPS was
$0.02, compared to a net loss of $49.6 million and loss per share
of $1.68 in the prior year period. Adjusted net income for the
third quarter of 2023 was $12.6 million, an increase of $11.8
million, compared to adjusted net income of $0.8 million in the
prior year period. Third quarter 2023 adjusted EPS was $0.42,
compared adjusted EPS of $0.03 in the prior year period.
EBITDA was $24.7 million for the third quarter of 2023 compared
to $12.8 million in the prior year period, an increase of 93.2%.
Third quarter Adjusted EBITDA was a record $29.3 million, an
increase of 80.0%, compared to $16.3 million in the prior year
period and above the Company's guidance of $18.0 million to $20.0
million. Adjusted EBITDA margin increased 280 basis points to 10.6%
compared to 7.8% in the prior year period.
Adjusted SG&A, adjusted net income, adjusted EPS, 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. See “Non-GAAP Financial Measures”
for a definition of these measures and the financial tables that
accompany this release for a reconciliation to the most comparable
GAAP measure.
Cash Flow and Balance Sheet
The Company ended the third quarter of 2023 with total cash and
cash equivalents of $124.6 million. For the third quarter ended
September 30, 2023, the Company generated $50.3 million of cash
from operations which was driven by increased earnings as well as
$30.2 million from working capital benefits. The Company’s total
debt, which is comprised of its term loan, ABL, convertible notes
and capital leases was $447.9 million as of September 30, 2023. The
Company had total liquidity, which it defines as cash on hand plus
debt availability, of $249.6 million as of September 30, 2023. The
Company's net leverage as measured under the Company's credit
agreement was 2.8x as of September 30, 2023, down from 4.3x in the
prior year period, driven by higher earnings and improved working
capital. Please refer to the financial table within this press
release for a calculation of the Company’s net leverage under the
credit agreement.
Outlook
For the full year 2023 the Company is raising its outlook
previously provided, and now expects the following, inclusive of
its Services segment optimization announced today:
- Net sales of $1,060 million to $1,080 million, an increase of
approximately 16.0% compared to 2022 based on the mid-point of the
guidance
- Adjusted EBITDA of $99 million to $103 million, an increase of
approximately 30.0% compared to 2022 based on the mid-point of the
guidance
The Company does not provide guidance for net income, the most
directly comparable GAAP measure to Adjusted EBITDA, and similarly
cannot provide a reconciliation between its forecasted adjusted
EBITDA and net income without unreasonable effort due to the
unavailability of reliable estimates for certain components of net
income and the respective reconciliations. These forecasted items
are not within the Company’s control, may vary greatly between
periods and could significantly impact future financial results for
the fourth quarter, and full year ending December 31, 2023.
Conference Call and Webcast
The Company will host a conference call with members of the
executive management team to discuss these results. 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 833-816-1410 and
international listeners may dial 412-317-0503.
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 28, 2023. North American listeners may dial 844-512-2921
and international listeners may dial 412-317-6671; the passcode is
10182495.
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. We engage with customers through more than
60,000 points of distribution across retail and e-commerce channels
with our branded and distributed medications as well as health and
wellness items, which are further supported by our world-class
medications manufacturing facility in Omaha, Nebraska and health
and wellness manufacturing facility in Springville, Utah. Our
national service platform operates in over 2,600 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
that we can give them.
Investors: katie.turner@petiq.com or
208.513.1513
Media: kara.schafer@petiq.com or
407.929.6727
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
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, general economic or market conditions, global
economic slowdown, increased inflation, rising interest rates,
global conflict and recent and potential future bank failures; our
ability to successfully grow our business through acquisitions and
our ability to integrate acquisitions, including Rocco & Roxie;
our ability to achieve the anticipated cost savings and
reinvestment from the Services segment optimization, the
anticipated costs associated with the optimization, and the success
of our remaining wellness centers following the optimization; our
dependency on a limited number of customers; our ability to
implement our growth strategy effectively; our ability to manage
our manufacturing and supply chain 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 introduce new products and improve existing products;
our ability 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” section of our Annual Report on Form
10-K for the year ended December 31, 2022 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 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 earnings per share, adjusted
SG&A, adjusted EBITDA, and adjusted EBITDA margin.
Adjusted net income consists of net income adjusted for tax
expense, acquisition expenses, integration costs, litigation costs,
restructuring costs and stock-based compensation expense. Adjusted
net income is utilized by management to evaluate the effectiveness
of our business strategies. Non-GAAP adjusted earnings per share is
defined as non-GAAP adjusted net income divided by the weighted
average number of shares of common stock outstanding during the
period.
Adjusted SG&A consists of SG&A adjusted for acquisition
expenses, stock-based compensation expense, integration costs, and
litigation expense.
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 including
acquisition costs, restructuring costs, stock-based compensation
expense, and integration costs. Adjusted EBITDA margin is adjusted
EBITDA stated as a percentage of net sales.
Adjusted EBITDA is utilized by management as a factor in
evaluating the Company's performance and the effectiveness of our
business strategies. The Company presents EBITDA because it is a
necessary component for computing adjusted EBITDA.
We believe that the use of these non-GAAP measures provides
additional tools for investors to use in evaluating ongoing
operating results and trends. In addition, you should be aware when
evaluating these non-GAAP measures 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 non-GAAP
measures may not be comparable to other similarly titled measures
computed by other companies, because all companies do not calculate
these non-GAAP measures in the same manner. Our management does
not, and you should not, consider the non-GAAP financial measures
in isolation or as an alternative to financial measures determined
in accordance with GAAP. The principal limitation of non-GAAP
financial measures is that they exclude significant expenses and
income that are required by GAAP to be recorded in our financial
statements. See a reconciliation of each non-GAAP measure to the
most comparable GAAP measure, in the financial tables that
accompany this release.
PetIQ, Inc. |
Condensed Consolidated Balance Sheets |
(Unaudited, in 000’s except for per share
amounts) |
|
|
|
September 30, 2023 |
|
December 31, 2022 |
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
124,614 |
|
|
$ |
101,265 |
|
Accounts receivable, net |
|
|
151,680 |
|
|
|
118,004 |
|
Inventories |
|
|
128,126 |
|
|
|
142,605 |
|
Other current assets |
|
|
6,241 |
|
|
|
8,238 |
|
Total current assets |
|
|
410,661 |
|
|
|
370,112 |
|
Property, plant and equipment, net |
|
|
62,927 |
|
|
|
73,395 |
|
Operating lease right of use assets |
|
|
12,289 |
|
|
|
18,231 |
|
Other non-current assets |
|
|
2,373 |
|
|
|
1,373 |
|
Intangible assets, net |
|
|
164,644 |
|
|
|
172,479 |
|
Goodwill |
|
|
204,195 |
|
|
|
183,306 |
|
Total assets |
|
$ |
857,089 |
|
|
$ |
818,896 |
|
Liabilities and equity |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
113,449 |
|
|
$ |
112,995 |
|
Accrued wages payable |
|
|
19,162 |
|
|
|
11,512 |
|
Accrued interest payable |
|
|
7,915 |
|
|
|
1,912 |
|
Other accrued expenses |
|
|
9,133 |
|
|
|
7,725 |
|
Current portion of operating leases |
|
|
6,877 |
|
|
|
6,595 |
|
Current portion of long-term debt and finance leases |
|
|
8,105 |
|
|
|
8,751 |
|
Total current liabilities |
|
|
164,641 |
|
|
|
149,490 |
|
Operating leases, less current installments |
|
|
8,783 |
|
|
|
12,405 |
|
Long-term debt, less current installments |
|
|
439,210 |
|
|
|
443,276 |
|
Finance leases, less current installments |
|
|
617 |
|
|
|
907 |
|
Other non-current liabilities |
|
|
4,667 |
|
|
|
1,025 |
|
Total non-current liabilities |
|
|
453,277 |
|
|
|
457,613 |
|
Equity |
|
|
|
|
Additional paid-in capital |
|
|
385,839 |
|
|
|
378,709 |
|
Class A common stock, par value $0.001 per share, 125,000 shares
authorized; 29,558 and 29,348 shares issued, respectively |
|
|
29 |
|
|
|
29 |
|
Class B common stock, par value $0.001 per share, 8,402 shares
authorized; 239 and 252 shares issued and outstanding,
respectively |
|
|
— |
|
|
|
— |
|
Class A treasury stock, at cost, 373 shares |
|
|
(3,857 |
) |
|
|
(3,857 |
) |
Accumulated deficit |
|
|
(143,115 |
) |
|
|
(162,733 |
) |
Accumulated other comprehensive loss |
|
|
(1,715 |
) |
|
|
(2,224 |
) |
Total stockholders' equity |
|
|
237,181 |
|
|
|
209,924 |
|
Non-controlling interest |
|
|
1,990 |
|
|
|
1,869 |
|
Total equity |
|
|
239,171 |
|
|
|
211,793 |
|
Total liabilities and equity |
|
$ |
857,089 |
|
|
$ |
818,896 |
|
PetIQ, Inc. |
Condensed Consolidated Statements of
Operations |
(Unaudited, in 000’s, except for per share
amounts) |
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
|
September 30, 2023 |
September 30, 2022 |
|
September 30, 2023 |
September 30, 2022 |
|
|
|
|
|
|
|
Product sales |
|
$ |
239,665 |
|
$ |
176,217 |
|
|
$ |
776,825 |
|
$ |
642,981 |
|
Services revenue |
|
|
37,354 |
|
|
33,508 |
|
|
|
105,212 |
|
|
94,453 |
|
Total net sales |
|
|
277,019 |
|
|
209,725 |
|
|
|
882,037 |
|
|
737,434 |
|
Cost of products sold |
|
|
174,286 |
|
|
131,414 |
|
|
|
585,616 |
|
|
485,833 |
|
Cost of
services |
|
|
30,122 |
|
|
27,541 |
|
|
|
87,671 |
|
|
81,222 |
|
Total cost of sales |
|
|
204,408 |
|
|
158,955 |
|
|
|
673,287 |
|
|
567,055 |
|
Gross profit |
|
|
72,611 |
|
|
50,770 |
|
|
|
208,750 |
|
|
170,379 |
|
Operating expenses |
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
55,021 |
|
|
45,984 |
|
|
|
153,507 |
|
|
144,815 |
|
Restructuring(1) |
|
|
8,235 |
|
|
— |
|
|
|
8,235 |
|
|
— |
|
Goodwill impairment |
|
|
— |
|
|
47,264 |
|
|
|
|
47,264 |
|
Operating income (loss) |
|
|
9,355 |
|
|
(42,478 |
) |
|
|
47,008 |
|
|
(21,700 |
) |
Interest expense, net |
|
|
8,581 |
|
|
7,276 |
|
|
|
26,137 |
|
|
19,696 |
|
Other expense (income), net |
|
|
35 |
|
|
172 |
|
|
|
158 |
|
|
(31 |
) |
Total other expense, net |
|
|
8,616 |
|
|
7,448 |
|
|
|
26,295 |
|
|
19,665 |
|
Pretax net income (loss) |
|
|
739 |
|
|
(49,926 |
) |
|
|
20,713 |
|
|
(41,365 |
) |
Income tax (expense) benefit |
|
|
(283 |
) |
|
355 |
|
|
|
(923 |
) |
|
(368 |
) |
Net income (loss) |
|
|
456 |
|
|
(49,571 |
) |
|
|
19,790 |
|
|
(41,733 |
) |
Net income (loss) attributable to non-controlling interest |
|
|
5 |
|
|
(435 |
) |
|
|
172 |
|
|
(360 |
) |
Net income (loss) attributable to PetIQ, Inc. |
|
$ |
451 |
|
$ |
(49,136 |
) |
|
$ |
19,618 |
|
$ |
(41,373 |
) |
Net income (loss) per share attributable to PetIQ, Inc.
Class A common stock |
|
|
|
|
|
|
Basic |
|
$ |
0.02 |
|
$ |
(1.68 |
) |
|
$ |
0.67 |
|
$ |
(1.42 |
) |
Diluted |
|
$ |
0.02 |
|
$ |
(1.68 |
) |
|
$ |
0.67 |
|
$ |
(1.42 |
) |
Weighted Average
shares of Class A common stock outstanding |
|
|
|
|
|
|
Basic |
|
|
29,181 |
|
|
29,224 |
|
|
|
29,116 |
|
|
29,224 |
|
Diluted |
|
|
29,715 |
|
|
29,224 |
|
|
|
29,386 |
|
|
29,224 |
|
(1) Restructuring charges include accelerated depreciation and
amortization, variable lease expenses, and other miscellaneous
costs. The remaining costs pertain to variable lease expenses,
lease termination costs, severance, and other miscellaneous
costs
PetIQ, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited, in 000’s) |
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities |
|
|
|
|
Net income (loss) |
|
$ |
19,790 |
|
|
$ |
(41,733 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities |
|
|
|
|
Depreciation and amortization of intangible assets and loan
fees |
|
|
35,816 |
|
|
|
26,564 |
|
Loss on disposition of property, plant, and equipment |
|
|
7 |
|
|
|
56 |
|
Stock based compensation expense |
|
|
8,059 |
|
|
|
8,904 |
|
Goodwill impairment |
|
|
— |
|
|
|
47,264 |
|
Other non-cash activity |
|
|
672 |
|
|
|
(7 |
) |
Changes in assets and liabilities, net of business acquisition |
|
|
|
|
Accounts receivable |
|
|
(32,562 |
) |
|
|
(11,219 |
) |
Inventories |
|
|
16,451 |
|
|
|
(50,847 |
) |
Other assets |
|
|
2,078 |
|
|
|
1,924 |
|
Accounts payable |
|
|
(593 |
) |
|
|
18,957 |
|
Accrued wages payable |
|
|
7,649 |
|
|
|
1,083 |
|
Other accrued expenses |
|
|
7,362 |
|
|
|
(1,818 |
) |
Net cash provided by (used in) operating activities |
|
|
64,729 |
|
|
|
(872 |
) |
Cash flows from investing activities |
|
|
|
|
Business acquisition (net of cash acquired) |
|
|
(27,634 |
) |
|
|
— |
|
Purchase of property, plant, and equipment |
|
|
(6,205 |
) |
|
|
(9,797 |
) |
Net cash used in investing activities |
|
|
(33,839 |
) |
|
|
(9,797 |
) |
Cash flows from financing activities |
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
35,000 |
|
|
|
44,000 |
|
Principal payments on long-term debt |
|
|
(40,700 |
) |
|
|
(49,700 |
) |
Repurchase of Class A common stock |
|
|
— |
|
|
|
(3,857 |
) |
Principal payments on finance lease obligations |
|
|
(1,138 |
) |
|
|
(1,097 |
) |
Tax withholding payments on Restricted Stock Units |
|
|
(984 |
) |
|
|
(862 |
) |
Exercise of options to purchase Class A common stock |
|
|
— |
|
|
|
115 |
|
Net cash used in financing activities |
|
|
(7,822 |
) |
|
|
(11,401 |
) |
Net change in cash and cash equivalents |
|
|
23,068 |
|
|
|
(22,070 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
281 |
|
|
|
(618 |
) |
Cash
and cash equivalents, beginning of period |
|
|
101,265 |
|
|
|
79,406 |
|
Cash and cash equivalents, end of period |
|
$ |
124,614 |
|
|
$ |
56,718 |
|
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, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
Products segment sales |
|
$ |
239,665 |
|
$ |
176,217 |
|
$ |
776,825 |
|
$ |
642,981 |
Services segment revenue: |
|
|
|
|
|
|
|
|
Same-store sales |
|
|
35,280 |
|
|
29,591 |
|
|
97,441 |
|
|
48,989 |
Non same-store sales |
|
|
2,074 |
|
|
3,917 |
|
|
7,771 |
|
|
15,873 |
Total services segment revenue |
|
$ |
37,354 |
|
$ |
33,508 |
|
$ |
105,212 |
|
$ |
94,453 |
Total net sales |
|
$ |
277,019 |
|
$ |
209,725 |
|
$ |
882,037 |
|
$ |
737,434 |
|
PetIQ, Inc. |
Reconciliation between Selling, General &
Administrative (“SG&A”) and Adjusted SG&A |
(Unaudited, in 000’s) |
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
$'s in 000's |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
SG&A |
|
$ |
55,021 |
|
|
$ |
45,984 |
|
|
$ |
153,507 |
|
|
$ |
144,815 |
|
% of Sales |
|
|
19.9 |
% |
|
|
21.9 |
% |
|
|
17.4 |
% |
|
|
27.4 |
% |
Less: |
|
|
|
|
|
|
|
|
Acquisition costs(3) |
|
|
— |
|
|
|
1,035 |
|
|
|
713 |
|
|
|
1,191 |
|
Stock based compensation expense |
|
|
2,851 |
|
|
|
2,238 |
|
|
|
8,059 |
|
|
|
8,904 |
|
Integration costs(4) |
|
|
484 |
|
|
|
200 |
|
|
|
1,508 |
|
|
|
943 |
|
Litigation expenses |
|
|
30 |
|
|
|
— |
|
|
|
30 |
|
|
|
3,802 |
|
Adjusted SG&A(6) |
|
$ |
51,656 |
|
|
$ |
42,511 |
|
|
$ |
143,197 |
|
|
$ |
129,975 |
|
% of Sales |
|
|
18.6 |
% |
|
|
20.3 |
% |
|
|
16.4 |
% |
|
|
25.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Reconciliation between Net Income and Adjusted
EBITDA |
(Unaudited, in 000’s) |
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
$'s in 000's |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
Net income (loss) |
|
$ |
456 |
|
|
$ |
(49,571 |
) |
|
$ |
19,790 |
|
|
$ |
(41,733 |
) |
Plus: |
|
|
|
|
|
|
|
|
Tax expense (benefit) |
|
|
283 |
|
|
|
(355 |
) |
|
|
923 |
|
|
|
368 |
|
Depreciation(1) |
|
|
10,851 |
|
|
|
3,576 |
|
|
|
18,536 |
|
|
|
10,773 |
|
Amortization |
|
|
4,546 |
|
|
|
4,602 |
|
|
|
15,285 |
|
|
|
13,602 |
|
Goodwill impairment(2) |
|
|
— |
|
|
|
47,264 |
|
|
|
— |
|
|
|
47,264 |
|
Interest expense, net |
|
|
8,581 |
|
|
|
7,276 |
|
|
|
26,137 |
|
|
|
19,696 |
|
EBITDA |
|
$ |
24,717 |
|
|
$ |
12,792 |
|
|
$ |
80,671 |
|
|
$ |
49,970 |
|
Acquisition costs(3) |
|
|
— |
|
|
|
1,035 |
|
|
|
713 |
|
|
|
1,191 |
|
Stock based compensation expense |
|
|
2,851 |
|
|
|
2,238 |
|
|
|
8,059 |
|
|
|
8,904 |
|
Integration costs(4) |
|
|
484 |
|
|
|
200 |
|
|
|
2,078 |
|
|
|
943 |
|
Restructuring(5) |
|
|
1,200 |
|
|
|
— |
|
|
|
1,200 |
|
|
|
— |
|
Litigation expenses |
|
|
30 |
|
|
|
— |
|
|
|
30 |
|
|
|
3,802 |
|
Adjusted EBITDA(6) |
|
$ |
29,282 |
|
|
$ |
16,265 |
|
|
$ |
92,751 |
|
|
$ |
64,810 |
|
Adjusted EBITDA Margin |
|
|
10.6 |
% |
|
|
7.8 |
% |
|
|
10.5 |
% |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetIQ, Inc. |
Reconciliation between Net Income and Adjusted Net
Income |
(Unaudited, in 000’s, except for per share
amounts) |
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
$'s in 000's |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
Net income (loss) |
|
$ |
456 |
|
$ |
(49,571 |
) |
|
$ |
19,790 |
|
$ |
(41,733 |
) |
Plus: |
|
|
|
|
|
|
|
|
Tax expense (benefit) |
|
|
283 |
|
|
(355 |
) |
|
|
923 |
|
|
369 |
|
Goodwill impairment(2) |
|
|
— |
|
|
47,264 |
|
|
|
— |
|
|
47,264 |
|
Acquisition costs(3) |
|
|
— |
|
|
1,035 |
|
|
|
713 |
|
|
1,191 |
|
Stock based compensation expense |
|
|
2,851 |
|
|
2,238 |
|
|
|
8,059 |
|
|
8,904 |
|
Integration costs(4) |
|
|
484 |
|
|
200 |
|
|
|
2,078 |
|
|
943 |
|
Restructuring(7) |
|
|
8,485 |
|
|
— |
|
|
|
8,485 |
|
|
— |
|
Litigation expenses |
|
|
30 |
|
|
— |
|
|
|
30 |
|
|
3,802 |
|
Adjusted Net income(6) |
|
$ |
12,589 |
|
$ |
811 |
|
|
$ |
40,078 |
|
$ |
20,740 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted EPS |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.43 |
|
$ |
0.03 |
|
|
$ |
1.38 |
|
$ |
0.71 |
|
Diluted |
|
$ |
0.42 |
|
$ |
0.03 |
|
|
$ |
1.36 |
|
$ |
0.71 |
|
Weighted Average
shares of Class A common stock outstanding used to compute non-GAAP
adjusted EPS |
Basic |
|
|
29,181 |
|
|
29,224 |
|
|
|
29,116 |
|
|
29,224 |
|
Diluted |
|
|
29,715 |
|
|
29,224 |
|
|
|
29,386 |
|
|
29,224 |
|
(1) Depreciation includes $7.3 million of accelerated
depreciation recognized during the three and nine months ended
September 30, 2023, associated with Services segment
optimization.
(2) Non-cash goodwill impairment due to a significant decline in
the Company’s market capitalization, driven primarily by rising
interest rates and macroeconomic conditions.
(3) Acquisition costs include legal, accounting, banking,
consulting, diligence, and other costs related to completed and
contemplated acquisitions.
(4) Integration costs represent costs related to integrating
acquired businesses, including personnel costs such as severance
and retention bonuses, consulting costs, contract termination costs
and IT conversion costs.
(5) Restructuring consists of variable lease expenses, inventory
valuation adjustments and other miscellaneous costs.
(6) Effective December 31, 2022, the Company no longer includes
non-same-store operating results related to the Services segment
wellness centers with less than six full quarters of operating
results, and pre-opening expenses, as an adjustment to its
calculation of its non-GAAP financial measures. As a result, the
following non-GAAP measures have been recast for comparability to
remove non-same-store operating results for the three and nine
months ended September 30, 2022, as follows:
- Adjusted SG&A - $1.2 and
$5.7 million, respectively
- Adjusted net income - $3.5 and
$15.9 million, respectively
- Adjusted EBITDA - $2.9 and
$13.6 million, respectively
(7) Restructuring consists of accelerated depreciation and
amortization, variable lease expenses, and other miscellaneous
costs.
PetIQ, Inc. |
Calculation of Net Leverage Ratio Under Term Loan
B |
(Unaudited, in 000’s, except for multiples) |
|
|
September 30, 2023 |
Total debt |
$ |
446,546 |
|
Total Capital Leases |
|
1,386 |
|
Less Cash |
|
(124,614 |
) |
Net Debt |
|
323,318 |
|
LTM Term Loan B Adjusted
EBITDA(1) |
|
115,610 |
|
Term Loan B net leverage |
|
2.8 |
x |
(1) Our Term Loan B documentation defines Adjusted EBITDA as net
income before interest, income taxes, depreciation and amortization
and a non-cash goodwill impairment charge, as further adjusted for
acquisition costs, loss on debt extinguishment and related costs,
stock based compensation expense, integration costs, litigation
expenses, and non-same-store net income (loss), which we refer to
as “Term Loan B Adjusted EBITDA.” Term Loan B Adjusted EBITDA is
not a non-GAAP measure and is presented solely for purposes of
providing investors an understanding of the Company’s financial
condition and liquidity and should not be relied upon for any
purposes other than an understanding of the Company’s financial
condition and liquidity as it relates to the Company’s Term Loan
B.
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