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PetIQ, Inc. Reports Second Quarter 2022 Financial Results

PetIQ, Inc.
PetIQ, Inc.

Second Quarter 2022 Net Income Increased 16.0% to $4.7 Million
Reports Adjusted EBITDA of Approximately $28 Million
Provides Third Quarter 2022 Guidance and Updates 2022 Annual Outlook

EAGLE, Idaho, Aug. 09, 2022 (GLOBE NEWSWIRE) -- PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading pet medication and wellness company, today reported financial results for the second quarter and six months ended June 30, 2022.

Cord Christensen, PetIQ’s Chairman & CEO commented, “Consumption of our products by pet parents improved as we progressed through the second quarter with strong contribution from PetIQ's higher-margin manufactured products, including our new product launches where we gained market share in-line with our plan, and we experienced good growth in our Services segment, although it wasn’t enough to fully offset our slower start to the flea and tick season. Year-to-date, net sales still increased compared to last year, and we are very pleased with our ability to expand gross margin and achieve adjusted EBITDA approximately in-line with our expectations while making planned incremental investments in marketing to support new product launches and the growth of our existing brands.”

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Second Quarter 2022 Highlights Compared to Prior Year Period

  • Net sales of $252.0 million compared to $271.0 million, a decrease of 7.0%; for comparative purposes, net sales decreased 2.8% excluding $11.8 million of sales in the prior year period related to loss of distribution rights

  • Product segment net sales of $219.0 million compared to $242.9 million, a decrease of 9.8%; Product segment net sales decreased 5.2% excluding the aforementioned item

  • PetIQ’s manufactured products increased to 28.9% of Product segment net sales compared to 28.4%

  • Services segment net revenues of $33.0 million compared to $28.2 million, an increase of 17.2%

  • Gross margin increased 260 basis points to 24.6%; adjusted gross margin increased 190 basis points to 26.4%

  • Net income increased 16.0% to $4.7 million, or earnings per diluted share of $0.16, compared to $4.0 million, or earnings per diluted share of $0.14

  • Adjusted EBITDA of $27.6 million — approximately in-line with the Company's guidance for the quarter of $28.0 million

  • Adjusted EBITDA margin decreased 180 basis points to 10.9% — slightly ahead of the Company's guidance for the quarter

Six Month 2022 Highlights Compared to Prior Year Period

  • Net sales of $527.7 million compared to $525.4 million, an increase of 0.4%; for comparative purposes, net sales increased 7.0% excluding $32.1 million of sales in the prior year period related to loss of distribution rights

  • Product segment net sales of $466.8 million compared to $472.9 million, a decrease of 1.3%; Product segment net sales increased 5.9% excluding the aforementioned item

  • PetIQ’s manufactured products increased to 27.4% of Product segment net sales compared to 25.4%

  • Services segment net revenues of $60.9 million compared to $52.5 million, an increase of 16.2%

  • Gross margin increased 220 basis points to 22.7%; adjusted gross margin increased 200 basis points from 22.7% to 24.7%

  • Net income increased 22.1% to $7.8 million, or earnings per diluted share of $0.26, compared to $6.4 million, or earnings per diluted share of $0.22

  • Adjusted EBITDA of $59.2 million

  • Adjusted EBITDA margin decreased 40 basis points to 11.2%

Second Quarter 2022 Financial Results
Net sales of $252.0 million for the second quarter of 2022, decreased 7.0%, compared to $271.0 million for the same period in the prior year. For comparative purposes, net sales decreased 2.8%, excluding $11.8 million of sales in the prior year period related to the aforementioned item.

Second quarter net sales were impacted by a slower start to the flea and tick season during the month of April due to weather. While weather was still an issue in May, consumption did improve each month of the quarter; however, this increase did not fully offset the decline to start the flea and tick season. In addition, later in the second quarter, the Company started to experience changes in consumer shopping habits evidenced by trade down to smaller pack sizes and lower cost brands as well as certain preventative care pet purchases occurring more closely to the time of need in this economic environment. Net sales were also impacted by the previously mentioned loss of distribution rights and a shift of approximately $5.0 million of net sales from the second quarter to the first quarter of 2022 due to stronger than normal fill orders for the start of the flea and tick season. The increase in Services segment net revenues was driven by improved revenue metrics and optimization of mobile clinics and wellness centers.

Second quarter 2022 gross profit was $62.0 million, an increase of 3.9% compared to $59.6 million in the prior year period. Gross margin increased 260 basis points to 24.6% from 22.0% in the prior year period. Adjusted gross profit was $65.2 million, an increase of 0.5% compared to $64.9 million in the prior year period, reflecting favorable product mix including the success of the Company’s manufactured product portfolio such as the recently launched product NextStar. The Company also benefited from Services segment optimization. Adjusted gross margin increased 190 basis points to 26.4% for the second quarter 2022 compared to 24.5% in the prior year period.

Selling, general and administrative expenses (“SG&A”) was $50.6 million for the second quarter of 2022 compared to $43.1 million in the prior year period. Adjusted SG&A was $44.1 million for the second quarter of 2022 compared to $37.5 million in the prior year period. As a percentage of net sales adjusted SG&A was 17.8%, an increase of 420 basis points compared to the prior year period. The increase in SG&A expenses was primarily due to a planned incremental $5.8 million, or 230 basis points of expense, to support two of the Company’s significant new manufactured brand introductions and continued marketing investments to help accelerate growth of its manufactured brand product portfolio.

Net income was $4.7 million for the second quarter of 2022, an increase of 16.0%, compared to $4.0 million in the prior year period. The Company reported earnings per diluted share of $0.16 compared to $0.14 in the second quarter of 2021.

Second quarter adjusted EBITDA was $27.6 million, approximately in-line with the Company's guidance of $28.0 million, despite lower-than- expected net sales and including the previously mentioned $5.8 million of planned incremental marketing expense. Second quarter 2022 adjusted EBITDA was lower than the $34.4 million reported in the prior year period. Adjusted EBITDA margin decreased 180 basis points to 10.9% compared to 12.7% in the prior year period slightly ahead of the Company's expectations for the second quarter of 2022.

Adjusted gross profit, adjusted gross margin, adjusted SG&A, non-GAAP 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.

Segment Results
Product:
For the second quarter of 2022, Product segment net sales decreased 9.8% to $219.0 million from $242.9 million in the prior year period. For comparative purposes, Product segment net sales decreased 5.2%, excluding $11.8 million of sales in the prior year period related to loss of distribution rights, as previously communicated the last few quarters. A reconciliation table of reported net sales and adjusted EBITDA reflecting the impact of the loss of distribution for the second quarter of 2022 and 2021 are included in this release.

Second quarter Product net sales were impacted by a slower start to the flea and tick season during the month of April due to weather. While weather was still an issue in May, consumption did improve each month of the quarter; however, this increase did not fully offset the decline to start the flea and tick season. In addition, later in the second quarter, the Company started to experience changes in consumer shopping habits evidenced by trade down to smaller pack sizes and lower cost brands as well as certain preventative care pet purchases occurring more closely to the time of need in this economic environment. Product segment net sales were also impacted by the previously mentioned loss of distribution rights and a shift of approximately $5.0 million of net sales from the second quarter to the first quarter of 2022 due to stronger than normal fill orders for the start of the flea and tick season.

Product segment adjusted EBITDA decreased 10.0% to $43.4 million from adjusted EBITDA of $48.2 million in the second quarter of 2021. Product segment adjusted EBITDA margin in the second quarter of 2022 was flat at 19.8% compared to the prior year period as a result of favorable product mix due to sales of PetIQ's manufactured products.

Services:
For the second quarter of 2022, Services segment net revenues were $33.0 million, an increase of 17.2% compared to $28.2 million in the same period last year. Services segment adjusted EBITDA was $4.7 million, an increase of 56.5% compared to $3.0 million in the second quarter of 2021. Services segment net revenues and adjusted EBITDA benefited from improved revenue metrics and optimization of mobile clinics and wellness centers.

Cash Flow and Balance Sheet
As of June 30, 2022, the Company had cash and cash equivalents of $5.4 million. The Company’s total debt, which is comprised of its term loan, ABL, and convertible debt, was $467.4 million as of June 30, 2022. The Company had total liquidity, which it defines as cash on hand plus availability, of $125.4 million as of June 30, 2022.

Outlook
The Company is updating its annual outlook and providing third quarter 2022 guidance.

Christensen commented, “Multiple consumer trends continue to support the long-term growth of the pet industry and PetIQ's unique position in the market as we offer convenient and affordable veterinarian products and services to more consumers. PetIQ's manufactured brands continue to gain share and outperform the categories in which we operate. While we continue to expect to drive a disproportionate market share in the second half of 2022, we expect total category growth to be less than prior years based on the slower flea and tick season and changes in consumer spending habits in this economic environment. As a result, we've taken a more conservative approach to our 2022 outlook and now expect to increase net sales approximately 4.0% for the full year based on the mid-point of our guidance. If you compare our first half results to our second half expectations, it suggests all the growth occurred in the first half of 2022 with no growth expected in the second half of the year. Simply doing this, does not tell the full story. In fact, our year-over-year growth is very balanced throughout 2022 when you look at pet parent consumption. The timing of sales is tied to our retail customers balancing inventory and reducing weeks of supply in the third quarter."

For the full year 2022 the Company now expects:

  • Net sales of $920 million to $940 million, in-line with 2021 based on the mid-point of the guidance. For comparative purposes, the Company expects net sales to increase 3.7% compared to 2021 based on the mid-point of the guidance, excluding $36.1 million of sales in the prior year related to the loss of distribution rights. Approximately two thirds of the Company’s lower net sales outlook is related to the slower start to the flea and tick season and the changes in consumer spending in this economic environment. Approximately one-third of the Company's lower net sales outlook is due to opening fewer than previously expected wellness centers due to the difficult veterinarian labor market.

  • Adjusted EBITDA of $92 million to $94 million, in-line with 2021 based on the mid-point of the guidance. For comparative purposes, the Company expects adjusted EBITDA to increase approximately 3.0% compared to 2021 based on the mid-point of the guidance, excluding $1.8 million of adjusted EBITDA in the prior year related to the loss of distribution rights.

The Company’s annual adjusted EBITDA outlook continues to assume adjusted SG&A will increase approximately 100 basis points to 17.3% in 2022 compared to 16.3% in 2021. The annual outlook also continues to assume nominal improvement in adjusted EBITDA contribution from the Services segment given the continued volatility in the segment’s results as a result of the ongoing impact from the veterinarian labor market.

For the third quarter of 2022 the Company expects:

  • Net sales of $200 million to $210 million, a decrease of 1.0% compared to the third quarter of 2021 based on the mid-point of the guidance. For comparative purposes, the Company expects net sales to be in-line with the third quarter of 2021 based on the mid-point of the guidance, when excluding $3.5 million of sales in the prior year period related to the loss of distribution rights.

  • Adjusted EBITDA of $16.5 million to $17.5 million, an increase of 3.8% compared to the third quarter of 2021 based on the mid-point of the guidance. For comparative purposes, the Company expects adjusted EBITDA to increase approximately 5.0% compared to the third quarter of 2021 based on the mid-point of the guidance, excluding $0.2 million of adjusted EBITDA in the prior year period related to the loss of distribution rights.

The Company does not provide guidance for the most directly comparable GAAP measure, net income, and similarly cannot provide a reconciliation between its forecasted adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain 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 full year ending December 31, 2022.

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 866-652-5200 and international listeners may dial 412-317-6060.

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 August 30, 2022. North American listeners may dial 844-512-2921 and international listeners may dial 412-317-6671; the passcode is 10169215.

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 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 we can give them.

Contact: katie.turner@petiq.com or 208.513.1513

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, 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; 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 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, 2021 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, non-GAAP adjusted earnings per share, adjusted gross profit, adjusted gross margin, adjusted SG&A, adjusted EBITDA, and adjusted EBITDA margin.

Adjusted net income consists of net income adjusted for tax expense, acquisition expenses, integration costs and costs of discontinued clinics, loss on debt extinguishment and related costs, non-same-store adjustment, litigation 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 gross profit consists of gross profit adjusted for gross (profit) loss on veterinarian clinics and wellness centers that are not part of same store sales. Adjusted gross profit is utilized by management to evaluate the effectiveness of our business strategies.

Adjusted SG&A consists of SG&A adjusted for acquisition expenses, stock-based compensation expense, non-same store adjustment, loss on debt extinguishment and related costs, integration costs and costs of discontinued clinics, and litigation expense.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin 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, Non-GAAP adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted selling, general and administrative expenses (Adjusted SG&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 SG&A, adjusted EBITDA (and accordingly, non-GAAP adjusted earnings per share 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 gross margin, adjusted SG&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 income, adjusted gross profit, adjusted SG&A, 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 gross margin, adjusted SG&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 income, adjusted gross profit, adjusted gross margin, adjusted SG&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

  • Mobile clinic – A mobile 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 clinics, these clinics are grouped as part of geographic regions.

  • 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

 

PetIQ, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in 000’s except for per share amounts)

 

 

 

June 30, 2022

 

December 31, 2021

Current assets

 

 

 

 

Cash and cash equivalents

 

$

5,396

 

 

$

79,406

 

Accounts receivable, net

 

 

168,831

 

 

 

113,947

 

Inventories

 

 

160,064

 

 

 

96,440

 

Other current assets

 

 

9,337

 

 

 

8,896

 

 Total current assets

 

 

343,627

 

 

 

298,689

 

Property, plant and equipment, net

 

 

76,691

 

 

 

76,613

 

Operating lease right of use assets

 

 

20,674

 

 

 

20,489

 

Other non-current assets

 

 

1,882

 

 

 

2,024

 

Intangible assets, net

 

 

181,566

 

 

 

190,662

 

Goodwill

 

 

230,594

 

 

 

231,110

 

 Total assets

 

$

855,035

 

 

$

819,587

 

Liabilities and equity

 

 

 

 

Current liabilities

 

 

 

 

  Accounts payable

 

$

81,093

 

 

$

55,057

 

  Accrued wages payable

 

 

10,370

 

 

 

12,704

 

  Accrued interest payable

 

 

1,387

 

 

 

3,811

 

  Other accrued expenses

 

 

11,539

 

 

 

11,680

 

  Current portion of operating leases

 

 

6,334

 

 

 

6,500

 

  Current portion of long-term debt and finance leases

 

 

8,446

 

 

 

8,350

 

 Total current liabilities

 

 

119,170

 

 

 

98,102

 

Operating leases, less current installments

 

 

15,259

 

 

 

14,843

 

Long-term debt, less current installments

 

 

450,904

 

 

 

448,470

 

Finance leases, less current installments

 

 

1,830

 

 

 

2,493

 

Other non-current liabilities

 

 

431

 

 

 

459

 

 Total non-current liabilities

 

 

468,424

 

 

 

466,265

 

Equity

 

 

 

 

Additional paid-in capital

 

 

374,057

 

 

 

368,006

 

Class A common stock, par value $0.001 per share, 125,000 shares
 authorized; 29,304 and 29,139 shares issued and outstanding, respectively

 

 

29

 

 

 

29

 

Class B common stock, par value $0.001 per share, 100,000 shares
 authorized; 252 and 272 shares issued and outstanding, respectively

 

 

 

 

 

 

Accumulated deficit

 

 

(106,762

)

 

 

(114,525

)

Accumulated other comprehensive loss

 

 

(2,203

)

 

 

(684

)

Total stockholders' equity

 

 

265,121

 

 

 

252,826

 

Non-controlling interest

 

 

2,320

 

 

 

2,394

 

Total equity

 

 

267,441

 

 

 

255,220

 

   Total liabilities and equity

 

$

855,035

 

 

$

819,587

 


 

PetIQ, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in 000’s, except for per share amounts)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

 

 

 

 

 

 

 

 

 

Product sales

 

$

219,014

 

 

$

242,857

 

 

$

466,764

 

 

$

472,891

 

Services revenue

 

 

33,000

 

 

 

28,154

 

 

 

60,945

 

 

 

52,467

 

Total net sales

 

 

252,014

 

 

 

271,011

 

 

 

527,709

 

 

 

525,358

 

Cost of products sold

 

 

163,568

 

 

$

185,837

 

 

 

354,419

 

 

 

368,664

 

Cost of services

 

 

26,472

 

 

$

25,546

 

 

 

53,681

 

 

 

49,267

 

Total cost of sales

 

 

190,040

 

 

 

211,383

 

 

 

408,100

 

 

 

417,931

 

Gross profit

 

 

61,974

 

 

 

59,628

 

 

 

119,609

 

 

 

107,427

 

Operating expenses

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

50,595

 

 

 

43,142

 

 

 

98,831

 

 

 

83,814

 

Operating income

 

 

11,379

 

 

 

16,486

 

 

 

20,778

 

 

 

23,613

 

Interest expense, net

 

 

6,299

 

 

 

7,655

 

 

 

12,420

 

 

 

12,525

 

Loss on debt extinguishment

 

 

 

 

 

5,453

 

 

 

 

 

 

5,453

 

Other income, net

 

 

(201

)

 

 

(451

)

 

 

(204

)

 

 

(655

)

Total other expense, net

 

 

6,098

 

 

 

12,657

 

 

 

12,216

 

 

 

17,323

 

Pretax net income

 

 

5,281

 

 

 

3,829

 

 

 

8,562

 

 

 

6,290

 

Income tax (expense) benefit

 

 

(603

)

 

 

205

 

 

 

(724

)

 

 

130

 

Net income

 

 

4,678

 

 

 

4,034

 

 

 

7,838

 

 

 

6,420

 

Net income attributable to non-controlling interest

 

 

46

 

 

 

8

 

 

 

75

 

 

 

361

 

Net income attributable to PetIQ, Inc.

 

$

4,632

 

 

$

4,026

 

 

$

7,763

 

 

$

6,059

 

Net income per share attributable to PetIQ, Inc. Class A common stock

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.14

 

 

$

0.27

 

 

$

0.22

 

Diluted

 

$

0.16

 

 

$

0.14

 

 

$

0.26

 

 

$

0.22

 

Weighted Average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

 

29,283

 

 

 

28,491

 

 

 

29,223

 

 

 

27,444

 

Diluted

 

 

29,329

 

 

 

29,156

 

 

 

29,304

 

 

 

28,059

 


 

PetIQ, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in 000’s)

 

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities

 

 

 

 

Net income

 

$

7,838

 

 

$

6,420

 

Adjustments to reconcile net income to net cash used in operating activities

 

 

 

 

Depreciation and amortization of intangible assets and loan fees

 

 

17,660

 

 

 

20,405

 

Loss on debt extinguishment

 

 

 

 

 

5,453

 

Loss on disposition of property, plant, and equipment

 

 

 

 

 

167

 

Stock based compensation expense

 

 

6,666

 

 

 

4,561

 

Other non-cash activity

 

 

48

 

 

 

176

 

Changes in assets and liabilities

 

 

 

 

Accounts receivable

 

 

(54,969

)

 

 

(57,011

)

Inventories

 

 

(63,771

)

 

 

(20,580

)

Other assets

 

 

(409

)

 

 

(2,166

)

Accounts payable

 

 

26,481

 

 

 

(6,632

)

Accrued wages payable

 

 

(2,359

)

 

 

(482

)

Other accrued expenses

 

 

(2,569

)

 

 

3,493

 

Net cash used in operating activities

 

 

(65,384

)

 

 

(46,196

)

Cash flows from investing activities

 

 

 

 

Proceeds from disposition of property, plant, and equipment

 

 

 

 

 

350

 

Purchase of property, plant, and equipment

 

 

(8,026

)

 

 

(18,302

)

Net cash used in investing activities

 

 

(8,026

)

 

 

(17,952

)

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of long-term debt

 

 

44,000

 

 

 

630,568

 

Principal payments on long-term debt

 

 

(42,800

)

 

 

(576,843

)

Tax distributions to LLC Owners

 

 

 

 

 

(72

)

Principal payments on finance lease obligations

 

 

(744

)

 

 

(1,226

)

Payment of deferred financing fees and debt discount

 

 

 

 

 

(6,360

)

Tax withholding payments on Restricted Stock Units

 

 

(865

)

 

 

(852

)

Exercise of options to purchase class A common stock

 

 

115

 

 

 

12,588

 

Net cash (used in) provided by financing activities

 

 

(294

)

 

 

57,803

 

Net change in cash and cash equivalents

 

 

(73,704

)

 

 

(6,345

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(306

)

 

 

52

 

Cash and cash equivalents, beginning of period

 

 

79,406

 

 

 

33,456

 

Cash and cash equivalents, end of period

 

$

5,396

 

 

$

27,163

 


Impact of Loss of Distribution on Sales and Adjusted EBITDA

The table below represents the portion of net sales and Adjusted EBITDA associated with the Company's distribution of such manufacturers’ products to certain customers. As these transactions will not recur in 2022, they are excluded from the measures below to provide additional details to investors for comparative purposes.

(Unaudited, in 000’s)

 

 

 

For the Three Months Ended

 

For the Year
Ended

 

 

March 31

June 30

September 30

December 31

 

December 31,
2021

Previously reported net sales

 

254,347

 

271,011

 

210,534

 

196,636

 

 

$

932,528

 

Loss of distribution

 

(20,250

)

(11,830

)

(3,510

)

(480

)

 

$

(36,070

)

Net Sales after impact of loss of distribution

 

234,097

 

259,181

 

207,024

 

196,156

 

 

$

896,458

 

 

 

 

 

 

 

 

 

Previously reported Adjusted EBITDA

 

26,861

 

34,359

 

16,364

 

15,308

 

 

$

92,892

 

Loss of distribution

 

(1,012

)

(592

)

(175

)

(24

)

 

$

(1,803

)

Adjusted EBITDA after impact of loss of distribution

 

25,849

 

33,767

 

16,189

 

15,284

 

 

$

91,089

 


PetIQ, Inc.
Summary Segment Results
(Unaudited, in 000’s)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

$'s in 000's

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Products segment sales

 

$

219,014

 

 

$

242,857

 

 

$

466,764

 

 

$

472,891

 

Services segment revenue:

 

 

 

 

 

 

 

 

Same-store sales

 

 

28,264

 

 

 

22,172

 

 

 

48,989

 

 

 

42,090

 

Non same-store sales

 

 

4,736

 

 

 

5,982

 

 

 

11,956

 

 

 

10,377

 

Total services segment revenue

 

$

33,000

 

 

$

28,154

 

 

$

60,945

 

 

$

52,467

 

Total net sales

 

$

252,014

 

 

$

271,011

 

 

$

527,709

 

 

$

525,358

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

Products

 

$

43,380

 

 

$

48,187

 

 

$

91,289

 

 

$

86,979

 

Services

 

 

4,740

 

 

 

3,028

 

 

 

7,824

 

 

 

5,124

 

Unallocated Corporate

 

 

(20,538

)

 

 

(16,856

)

 

 

(39,936

)

 

 

(30,883

)

Total Adjusted EBITDA

 

$

27,582

 

 

$

34,359

 

 

$

59,177

 

 

$

61,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


PetIQ, Inc.
Reconciliation between gross profit and adjusted gross profit
(Unaudited, in 000’s)

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

$'s in 000's

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Gross profit

 

$

61,974

 

 

$

59,628

 

 

$

119,609

 

 

$

107,427

 

Plus:

 

 

 

 

 

 

 

 

Non same-store gross (profit) loss(3)

 

 

3,204

 

 

 

5,257

 

 

 

7,904

 

 

 

9,220

 

Adjusted gross profit

 

$

65,178

 

 

$

64,885

 

 

$

127,513

 

 

$

116,647

 

Gross Margin %

 

 

24.6

%

 

 

22.0

%

 

 

22.7

%

 

 

20.4

%

Adjusted gross margin %

 

 

26.4

%

 

 

24.5

%

 

 

24.7

%

 

 

22.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


PetIQ, Inc.
Reconciliation between Selling, General & Administrative (“SG&A”) and Adjusted SG&A
(Unaudited, in 000’s)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

$'s in 000's

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

SG&A

 

$

50,595

 

 

$

43,142

 

 

$

98,831

 

 

$

83,814

 

Less:

 

 

 

 

 

 

 

 

Acquisition costs(1)

 

 

156

 

 

 

86

 

 

 

156

 

 

 

92

 

Loss on debt extinguishment and related costs(2)

 

 

 

 

 

985

 

 

 

 

 

 

985

 

Stock based compensation expense

 

 

2,843

 

 

 

2,439

 

 

 

6,666

 

 

 

4,561

 

Non same-store adjustment(3)

 

 

1,991

 

 

 

1,106

 

 

 

4,456

 

 

 

2,791

 

Integration costs and costs of discontinued clinics(4)

 

 

404

 

 

 

735

 

 

 

743

 

 

 

687

 

Litigation expenses

 

 

1,141

 

 

 

320

 

 

 

3,802

 

 

 

563

 

Adjusted SG&A

 

$

44,060

 

 

$

37,471

 

 

$

83,008

 

 

$

74,135

 

% of Sales (GAAP)

 

 

20.1

%

 

 

15.9

%

 

 

18.7

%

 

 

16.0

%

% of Sales (Adjusted)

 

 

17.8

%

 

 

14.1

%

 

 

16.1

%

 

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


PetIQ, Inc.
Reconciliation between Net Income and Adjusted EBITDA
(Unaudited, in 000’s)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

$'s in 000's

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Net income

 

$

4,678

 

 

$

4,034

 

 

$

7,838

 

 

$

6,420

 

Plus:

 

 

 

 

 

 

 

 

Tax expense (benefit)

 

 

603

 

 

 

(205

)

 

 

724

 

 

 

(130

)

Depreciation

 

 

3,515

 

 

 

3,143

 

 

 

7,197

 

 

 

6,274

 

Amortization

 

 

4,477

 

 

 

4,627

 

 

 

9,000

 

 

 

13,055

 

Interest expense, net

 

 

6,299

 

 

 

7,655

 

 

 

12,420

 

 

 

12,525

 

EBITDA

 

$

19,572

 

 

$

19,254

 

 

$

37,179

 

 

$

38,144

 

Acquisition costs(1)

 

 

156

 

 

 

86

 

 

 

156

 

 

 

92

 

Stock based compensation expense

 

 

2,843

 

 

 

2,439

 

 

 

6,666

 

 

 

4,561

 

Loss on debt extinguishment and related costs(2)

 

 

 

 

 

6,438

 

 

 

 

 

 

6,438

 

Non same-store adjustment(3)

 

 

3,466

 

 

 

5,087

 

 

 

10,631

 

 

 

10,735

 

Integration costs and costs of discontinued clinics(4)

 

 

404

 

 

 

735

 

 

 

743

 

 

 

687

 

Litigation expenses

 

 

1,141

 

 

 

320

 

 

 

3,802

 

 

 

563

 

Adjusted EBITDA

 

$

27,582

 

 

$

34,359

 

 

$

59,177

 

 

$

61,220

 

Adjusted EBITDA Margin

 

 

10.9

%

 

 

12.7

%

 

 

11.2

%

 

 

11.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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 Six Months Ended

$'s in 000's

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Net income

 

$

4,678

 

$

4,034

 

 

$

7,838

 

$

6,420

 

Plus:

 

 

 

 

 

 

 

 

Tax expense (benefit)

 

 

603

 

 

(205

)

 

 

724

 

 

(130

)

Acquisition costs(1)

 

 

156

 

 

86

 

 

 

156

 

 

92

 

Loss on debt extinguishment and related costs(2)

 

 

 

 

6,438

 

 

 

 

 

6,438

 

Stock based compensation expense

 

 

2,843

 

 

2,439

 

 

 

6,666

 

 

4,561

 

Non same-store adjustment(3)

 

 

5,195

 

 

5,787

 

 

 

12,360

 

 

12,011

 

Integration costs and costs of discontinued clinics(4)

 

 

404

 

 

735

 

 

 

743

 

 

687

 

Litigation expenses

 

 

1,141

 

 

320

 

 

 

3,802

 

 

563

 

Adjusted Net income

 

$

15,020

 

$

19,634

 

 

$

32,289

 

$

30,642

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted EPS

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

$

0.69

 

 

$

1.10

 

$

1.12

 

Diluted

 

$

0.51

 

$

0.67

 

 

$

1.10

 

$

1.09

 

Weighted Average shares of Class A common stock outstanding used to compute non-GAAP adjusted EPS

 

 

Basic

 

 

29,283

 

 

28,491

 

 

 

29,223

 

 

27,444

 

Diluted

 

 

29,329

 

 

29,156

 

 

 

29,304

 

 

28,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Acquisition costs include legal, accounting, banking, consulting, diligence, and other 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 costs.

(3) Non same-store adjustment includes revenue and costs, and associated gross profit, related to our Services segment wellness centers and host partners with less than six full quarters of operating results, and also include pre-opening expenses.

(4) Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses including personnel costs such as severance and signing bonuses, consulting costs, contract termination, and IT conversion costs. Depending on the type of costs, the costs are primarily in the Products and the corporate segments. Costs of discontinued clinics represent costs to close Services segment locations.