PetIQ, Inc. Reports Record Fourth Quarter and Full Year 2021 Financial Results
Reports Fourth Quarter Net Sales of $196.6 Million and Full Year Net Sales of $932.5 Million
Company Provides First Quarter 2022 and Full Year 2022 Outlook
EAGLE, Idaho – March 1, 2022 (GLOBE NEWSWIRE) - PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading pet medication and wellness company, today reported financial results for the fourth quarter and full year ended December 31, 2021.
Cord Christensen, PetIQ’s Chairman & CEO commented, “We are very pleased with our strong finish to 2021. Our record fourth quarter was better than we expected driven by growth in the Products segment as we benefited from strong flea and tick and health and wellness sales.”
Christensen continued, “We are excited to launch two new products in the first half of 2022 that we expect to help fuel continued momentum in our branded Products segment. We also are introducing a direct-to-consumer initiative in the second half of 2022 as we continue to provide smarter options for pet parents to help enrich their pets’ lives through convenient and affordable access to veterinarian products and services. We believe our team’s strong operational execution positions us well for continued growth and increasing contribution from our own pet health and wellness brands at an attractive margin in 2022.”
Fourth Quarter 2021 Highlights Compared to Prior Year Period
| ● | Record net sales of $196.6 million compared to $164.2 million, an increase of 19.7% |
| ● | Product segment net sales of $170.9 million compared to $145.1 million, an increase of 17.8% |
| ● | PetIQ’s manufactured products increased to 31% of Product segment net sales |
| ● | Services segment net revenues of $25.7 million compared to $19.2 million, an increase of 34.1% |
| ● | Gross margin increased 140 basis points to 18.8%; adjusted gross margin increased 130 basis points to 21.3% |
| ● | Net loss of $14.5 million compared to a net loss of $10.1 million |
| ● | Adjusted net loss of $0.3 million compared to adjusted net loss of $1.0 million, an improvement of $0.7 million |
| ● | Adjusted EBITDA of $15.3 million compared to $13.0 million, an increase of 17.6% |
| ● | 26 new wellness center openings in the fourth quarter of 2021 |
Full Year 2021 Highlights Compared to Prior Year Period
| ● | Record net sales of $932.5 million compared to $780.1 million, an increase of 19.5% |
| ● | Product segment net sales of $825.4 million compared to $725.7 million, an increase of 13.7% |
| ● | PetIQ’s manufactured products were 28% of Product segment net sales |
| ● | Services segment net revenues of $107.1 million compared to $54.3 million, an increase of 97.1% |
| ● | Gross margin increased 270 basis points to 20.0%; adjusted gross margin increased 270 basis points to 22.2% |
| ● | Net loss was $16.4 million compared to a net loss of $85.7 million |
| ● | Adjusted net income of $31.5 million compared to adjusted net income of $20.1 million, an improvement of $11.4 million |
| ● | Adjusted EBITDA of $92.9 million compared to $67.8 million, an increase of 37.0% |
| ● | Adjusted EBITDA margin increased 130 basis points to 10.0% |
| ● | 98 new wellness center openings in 2021 |
Fourth Quarter 2021 Financial Results
Record net sales of $196.6 million for the fourth quarter of 2021, increased 19.7%, compared to $164.2 million for the same period in the prior year. Fourth quarter net sales were driven by growth in both the Product and Services segments. The Product segment benefited from a robust and stronger than normal end to the flea and tick season with broad-based growth across all categories and continued strength in manufactured products. The Services segment benefited from the reopening of wellness centers and mobile clinics as compared to the prior year period, despite the continued labor-related headwinds experienced in the fourth quarter of 2021. Product segment sales were $170.9 million and Services segment revenues were $25.7 million in the fourth quarter of 2021.
Fourth quarter 2021 gross profit was $36.9 million, an increase of 29.1% compared to $28.6 million in the prior year period. Gross margin increased 140 basis points to 18.8% from 17.4% in the prior year period. Adjusted gross profit was $40.2 million compared to $32.3 million in the prior year period, which reflects favorable product mix including the growth in sales of the Company’s manufactured product portfolio with items such as Capstar® and reflects the benefit of wellness center optimization. Adjusted gross margin increased 130 basis points to 21.3% for the fourth quarter 2021 compared to 20.0% in the prior year period.
Selling, general and administrative expenses (“SG&A”) was $41.5 million for the fourth quarter of 2021 compared to $32.6 million in the prior year period. Adjusted SG&A was $34.3 million for the fourth quarter of 2021 compared to $27.1 million in the prior year period. As a percentage of net sales adjusted SG&A was 18.1% an increase of 130 basis points compared to the prior year period. The increase in SG&A on a GAAP and adjusted basis was primarily due to increased expenses to support the Company’s growth, including increased selling and advertising costs to support the Services segment wellness center clinic openings and to support growth of PetIQ owned brands in the Products segment.
Net loss was $14.5 million for the fourth quarter of 2021 compared to a net loss of $10.1 million in the prior year period. Adjusted net loss was $0.3 million an improvement of $0.7 million compared to an adjusted net loss of $1.0 million in the prior year period.
Fourth quarter adjusted EBITDA was $15.3 million, an increase of 17.6%, compared to $13.0 million in the prior year period. Adjusted EBITDA margin decreased slightly to 7.8% compared to 7.9% in the prior year period which reflects the timing of expenses as full year adjusted EBITDA margin of 10.0% increased 140 basis points compared to 2020.
Adjusted gross profit, adjusted gross margin, adjusted SG&A, 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. 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 fourth quarter of 2021, Product segment net sales increased 17.8% to $170.9 million from $145.1 million in the prior year period. For comparative purposes, Product segment net sales increased 17.4%, excluding $0.5 million in sales related to loss of distribution rights for certain animal health manufacturing products, as previously communicated the last few quarters. A reconciliation table is included of reported net sales to pro forma net sales and adjusted EBITDA for each quarter of 2021 and the full year 2021 is included in this release. The fourth 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.
Product segment adjusted EBITDA increased 15.7% to $28.7 million from adjusted EBITDA of $24.8 million in the fourth quarter of 2020. Product segment adjusted EBITDA margin in the fourth quarter of 2021 decreased 30 basis points to 16.8% compared to the prior year period.
For the year ended December 31, 2021, Product segment net sales increased 13.7% to $825.4 million compared to $725.7 million for the prior year period. For comparative purposes, Product segment net sales increased 8.8%, excluding $36.1 million in sales related to loss of distribution rights for certain animal health manufacturing products, as previously communicated the last few quarters. Product adjusted EBITDA increased 27.4% to $149.3 million for the year ended December 31, 2021, representing an adjusted EBITDA margin of 18.1%, an increase of 190 basis points.
Services:
For the fourth quarter of 2021, Services segment net revenues were $25.7 million, an increase of 34.1% compared to $19.2 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 the continued labor-related headwinds the Company experienced in the fourth quarter of 2021. Services segment adjusted EBITDA was $2.8 million compared to $0.5 million in the fourth quarter of 2020.
For the year ended December 31, 2021, Services segment net revenues were $107.1 million compared to $54.3 million for the prior year period, an increase of 97.1%. Services segment adjusted EBITDA increased $8.4 million to $11.7 million for the year ended December 31, 2021, compared to $3.4 million for the prior year period.
Cash Flow and Balance Sheet
As of December 31, 2021, the Company had cash and cash equivalents of $79.4 million. The Company’s long-term debt, which is comprised of its term loan and convertible debt, was $448.5 million as of December 31, 2021. The Company had total liquidity, which it defines as cash on hand plus availability, of $204.4 million as of December 31, 2021.
Outlook
The Company is reintroducing annual and quarterly guidance.
For the full year 2022 the Company expects:
| ● | Net sales of approximately $985 million representing an increase of 5.6% compared to 2021. For comparative purposes, the Company expects net sales to increase approximately 10.0% excluding $36.1 million of sales related to loss of distribution rights for certain animal health manufacturing products, previously communicated the last few quarters. |
| ● | Adjusted EBITDA of approximately $100 million representing an increase of 7.6% compared to 2021. For comparative purposes, the Company expects adjusted EBITDA to increase approximately 10.0%, excluding $1.8 million in adjusted EBITDA related to loss of distribution rights for certain animal health manufacturing products, previously communicated the last few quarters. |
The Company’s annual adjusted EBITDA outlook assumes adjusted SG&A to increase approximately 100 basis points to 17.3% in 2022 compared to 16.3% in 2021 as a result of an incremental $15 million, or 150 basis points of expense, to support its launch into direct-to-consumer channels, two significant new manufactured brand introductions, and continued marketing investments to help accelerate growth of its manufactured brand product portfolio. The Company expects two-thirds of the aforementioned incremental $15 million of SG&A expense to be incurred in the first half of 2022 with a majority recognized in the second quarter of 2022 and zero incremental expense in the fourth quarter of 2022. The annual outlook also assumes 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 to the veterinarian labor market from the global pandemic. The Company expects 2022 net sales seasonality to be very similar to the net sales cadence in 2021 for the first two quarters of the year. In the second half of 2021, the Company benefited from a strong late flea and tick season and as a result it expects most of the net sales growth in the second half of 2022 will be weighted to the third quarter with the fourth quarter net sales up nominally.
For the first quarter of 2022 the Company expects:
| ● | Net sales of approximately $270 million representing an increase of 6.0% compared to the first quarter of 2021. For comparative purposes, the Company expects net sales to increase approximately 15.3%, excluding $20.2 million of sales related to loss of distribution rights for certain animal health manufacturing products, previously communicated the last few quarters. |
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 March 22, 2022. North American listeners may dial 844-512-2921 and international listeners may dial 412-317-6671; the passcode is 13726719.
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 2,900 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 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, adjusted gross profit, adjusted gross margin, adjusted SG&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, 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 net income (loss) is utilized by management to evaluate the effectiveness of our business strategies.
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 and COVID related costs. 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, integration costs, COVID-19 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 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 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 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 (loss) 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 (loss) 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 (loss) 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. |
Condensed Consolidated Balance Sheets
(Unaudited, in 000’s except for per share amounts)
| | | | | | As adjusted1 | |
| | December 31, 2021 |
| December 31, 2020 |
| ||
Current assets | | | | | | | |
Cash and cash equivalents | | $ | 79,406 | | $ | 33,456 | |
Accounts receivable, net | | | 113,947 | | | 102,755 | |
Inventories | | | 96,440 | | | 97,773 | |
Other current assets | | | 8,896 | | | 8,312 | |
Total current assets | | | 298,689 | | | 242,296 | |
Property, plant and equipment, net | | | 76,613 | | | 63,146 | |
Operating lease right of use assets | | | 20,489 | | | 20,122 | |
Other non-current assets | | | 2,024 | | | 1,870 | |
Intangible assets, net | | | 190,662 | | | 213,000 | |
Goodwill | | | 231,110 | | | 231,158 | |
Total assets | | $ | 819,587 | | $ | 771,592 | |
Liabilities and equity | |
|
| |
|
| |
Current liabilities | |
|
| |
|
| |
Accounts payable | | $ | 55,057 | | $ | 68,131 | |
Accrued wages payable | | | 12,704 | | | 10,540 | |
Accrued interest payable | | | 3,811 | | | 903 | |
Other accrued expenses | | | 11,680 | | | 8,815 | |
Current portion of operating leases | | | 6,500 | | | 4,915 | |
Current portion of long-term debt and finance leases | | | 8,350 | | | 7,763 | |
Total current liabilities | | | 98,102 | | | 101,067 | |
Operating leases, less current installments | | | 14,843 | | | 15,789 | |
Long-term debt, less current installments | | | 448,470 | | | 403,591 | |
Finance leases, less current installments | | | 2,493 | | | 3,338 | |
Other non-current liabilities | | | 459 | | | 1,397 | |
Total non-current liabilities | | | 466,265 | | | 424,115 | |
Equity | | |
| | |
| |
Additional paid-in capital | | | 368,006 | | | 319,642 | |
Class A common stock, par value $0.001 per share, 125,000 shares authorized; 29,139 and 25,711 shares issued and outstanding, respectively | | | 29 | | | 26 | |
Class B common stock, par value $0.001 per share, 100,000 shares authorized; 272 and 3,040 shares issued and outstanding, respectively | | | — | | | 3 | |
Accumulated deficit | | | (114,525) | | | (98,558) | |
Accumulated other comprehensive loss | | | (684) | | | (686) | |
Total stockholders' equity | | | 252,826 | | | 220,427 | |
Non-controlling interest | | | 2,394 | | | 25,983 | |
Total equity | | | 255,220 | | | 246,410 | |
Total liabilities and equity | | $ | 819,587 | | $ | 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 adjusted1 | | | | | | As adjusted1 |
| | For the Three Months Ended | | For the Year Ended | ||||||||
|
| December 31, 2021 |
| December 31, 2020 |
| December 31, 2021 |
| December 31, 2020 | ||||
| | | | | | | | | | | | |
Product sales | | $ | 170,947 | | $ | 145,055 | | $ | 825,395 | | $ | 725,705 |
Services revenue | | | 25,689 | | | 19,153 | | | 107,133 | | | 54,346 |
Total net sales | | | 196,636 | | | 164,208 | | | 932,528 | | | 780,051 |
Cost of Products Sold | |
| 135,729 | |
| 115,306 | |
| 646,402 | |
| 584,401 |
Cost of services | | | 24,013 | | | 20,320 | | | 99,733 | | | 60,462 |
Total cost of sales | | | 159,742 | | | 135,626 | | | 746,135 | | | 644,863 |
Gross profit | |
| 36,894 | |
| 28,582 | |
| 186,393 | |
| 135,188 |
Operating expenses | |
|
| |
|
| |
|
| |
|
|
Selling, general and administrative expenses | |
| 41,455 | |
| 32,631 | |
| 170,521 | |
| 138,375 |
Contingent note revaluations gain | | | | | | | | | | | | |
Operating income (loss) | |
| (4,561) | |
| (4,049) | |
| 15,872 | |
| (3,187) |
Interest expense, net | |
| 6,003 | |
| 6,347 | |
| 24,696 | |
| 22,807 |
Foreign currency (gain) loss, net | |
| 61 | |
| (235) | |
| 159 | |
| (109) |
Loss on debt extinguishment | |
| — | |
| — | |
| 5,453 | |
| — |
Other income, net | |
| 168 | |
| 131 | |
| (1,922) | |
| (571) |
Total other expense, net | |
| 6,232 | |
| 6,243 | |
| 28,386 | |
| 22,127 |
Pretax net loss | | | (10,793) | | | (10,292) | | | (12,514) | | | (25,314) |
Income tax expense | | | (3,682) | | | 169 | | | (3,869) | | | (60,413) |
Net loss | |
| (14,475) | | | (10,123) | | | (16,383) | |
| (85,727) |
Net loss attributable to non-controlling interest | | | (351) | | | (1,297) | | | (416) | | | (3,072) |
Net loss attributable to PetIQ, Inc. | | $ | (14,124) | | $ | (8,826) | | $ | (15,967) | | $ | (82,655) |
Net loss per share attributable to PetIQ, Inc. Class A common stock | | | | | | | | | | | | |
Basic | | $ | (0.49) | | $ | (0.35) | | $ | (0.57) | | $ | (3.36) |
Diluted | | $ | (0.49) | | $ | (0.35) | | $ | (0.57) | | $ | (3.36) |
Weighted Average shares of Class A common stock outstanding | | | | | | | | | | | | |
Basic | | | 29,113 | | | 25,413 | | | 28,242 | | | 24,629 |
Diluted | | | 29,113 | | | 25,413 | | | 28,242 | | | 24,629 |
| (1) | Amounts adjusted for adoption of ASU 2020-06 |
PetIQ, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in 000’s)
|
| For the Year Ended December 31, | |||||
| | | | | | As adjusted1 | |
| | 2021 | | 2020 | | ||
Cash flows from operating activities |
| | | | | | |
Net loss |
| $ | (16,383) | | $ | (85,727) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
| |
| | |
| |
Depreciation, amortization of intangible assets and loan fees |
| | 39,300 | | | 27,483 | |
Loss on debt extinguishment |
| | 5,453 | | | — | |
Gain on disposition of property, plant, and equipment |
| | (1,183) | | | (238) | |
Stock based compensation expense | | | 9,428 | | | 9,170 | |
Deferred tax adjustment | | | 3,487 | | | 59,708 | |
Termination of supply agreement | | | — | | | 7,801 | |
Contingent note revaluation | | | — | | | — | |
Other non-cash activity |
| | 233 | | | 164 | |
Changes in assets and liabilities |
| | | | | | |
Accounts receivable |
| | (11,197) | | | (31,652) | |
Inventories |
| | 1,283 | | | (17,846) | |
Other assets |
| | (1,380) | | | 556 | |
Accounts payable |
| | (12,131) | | | 17,435 | |
Accrued wages payable |
| | 2,194 | | | 1,424 | |
Other accrued expenses |
| | 4,663 | | | 7,121 | |
Net cash provided by (used in) operating activities |
| | 23,767 | | | (4,601) | |
Cash flows from investing activities |
| |
| | |
| |
Proceeds from disposition of property, plant, and equipment | | | 5,132 | | | 442 | |
Purchase of property, plant, and equipment |
| | (31,270) | | | (22,392) | |
Purchase of Capstar and related intangibles | | | — | | | (96,072) | |
Business acquisitions (net of cash acquired) | | | — | | | — | |
Net cash used in investing activities |
| | (26,138) | | | (118,022) | |
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 |
| | 642,568 | | | 837,675 | |
Principal payments on long-term debt |
| | (597,071) | | | (838,073) | |
Payment of financing fees on Convertible Notes | | | — | | | (5,884) | |
Tax distributions to LLC Owners | | | (70) | | | (47) | |
Principal payments on finance lease obligations |
| | (1,926) | | | (1,965) | |
Payment of deferred financing fees and debt discount |
| | (7,656) | | | (550) | |
Tax withholding payments on Restricted Stock Units | | | (937) | | | (595) | |
Exercise of options to purchase class A common stock | | | 13,426 | | | 9,274 | |
Net cash provided by financing activities |
| | 48,334 | | | 128,764 | |
Net change in cash and cash equivalents |
| | 45,963 | | | 6,141 | |
Effect of exchange rate changes on cash and cash equivalents |
| | (13) | | | 43 | |
Cash and cash equivalents, beginning of period |
| | 33,456 | | | 27,272 | |
Cash and cash equivalents, end of period | | $ | 79,406 | | $ | 33,456 | |
| (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 year ended | ||||||||
$'s in 000's | December 31, 2021 | | December 31, 2020 | | December 31, 2021 | | December 31, 2020 | ||||
Products segment sales | $ | 170,947 | | $ | 145,055 | | $ | 825,395 | | $ | 725,705 |
Services segment revenue: | | | | | | | | | | | |
Same-store sales | | 18,133 | | | 16,285 | | | 81,955 | | | 45,359 |
Non same-store sales | | 7,556 | | | 2,868 | | | 25,178 | | | 8,987 |
Total services segment revenue | | 25,689 | | | 19,153 | | | 107,133 | | | 54,346 |
Total net sales | | 196,636 | | | 164,208 | | | 932,528 | | | 780,051 |
| | | | | | | | | | | |
Adjusted EBITDA | | | | | | | | | | | |
Products | | 28,664 | | | 24,768 | | | 149,321 | | | 117,216 |
Services | | 2,797 | | | 509 | | | 11,742 | | | 3,387 |
Unallocated Corporate | | (16,153) | | | (12,256) | | | (68,171) | | | (52,811) |
Total Adjusted EBITDA | $ | 15,308 | | $ | 13,021 | | $ | 92,892 | | $ | 67,792 |
Reconciliation between gross profit and adjusted gross profit
(Unaudited, in 000’s)
| For the three months ended | | For the year ended | ||||||||
| December 31, 2021 | | December 31, 2020 | | December 31, 2021 | | December 31, 2020 | ||||
Gross profit | $ | 36,894 | | $ | 28,582 | | $ | 186,393 | | $ | 135,188 |
Plus: | | | | | | | | | | | |
Non same-store gross (profit) loss(3) | | 3,341 | | | 3,535 | | | 15,146 | | | 11,195 |
COVID-19 related costs(5) | | — | | | 225 | | | — | | | 4,403 |
Adjusted gross profit | $ | 40,235 | | $ | 32,342 | | $ | 201,539 | | $ | 150,786 |
Gross Margin % | | 18.8% | | | 17.4% | | | 20.0% | | | 17.3% |
Adjusted gross margin % | | 21.3% | | | 20.0% | | | 22.2% | | | 19.6% |
Reconciliation between Selling, General &Administrative (“SG&A”) and adjusted SG&A
(Unaudited, in 000’s)
| For the three months ended | | For the year ended | ||||||||
| December 31, 2021 | | December 31, 2020 | | December 31, 2021 | | December 31, 2020 | ||||
SG&A | $ | 41,455 | | $ | 32,631 | | $ | 170,521 | | $ | 138,375 |
Less: | | | | | | | | | | | |
Acquisition costs(1) | | — | | | 805 | | | 92 | | | 2,620 |
Loss on debt extinguishment and related costs(2) | | — | | | — | | | 985 | | | — |
Stock based compensation expense | | 2,240 | | | 2,621 | | | 9,428 | | | 9,170 |
Non same-store adjustment(3) | | 2,888 | | | 1,416 | | | 8,013 | | | 5,159 |
Integration costs(4) | | 212 | | | 165 | | | (876) | | | 9,776 |
Litigation expenses | | 1,219 | | | 283 | | | 4,105 | | | 1,006 |
CFO Transition | | 597 | | | — | | | 928 | | | — |
COVID-19 related costs(5) | | — | | | 218 | | | — | | | 2,073 |
Adjusted SG&A | $ | 34,299 | | $ | 27,123 | | $ | 147,846 | | $ | 108,571 |
% of Sales (GAAP) | | 21.1% | | | 19.9% | | | 18.3% | | | 17.7% |
% of Sales (Adjusted) | | 18.1% | | | 16.8% | | | 16.3% | | | 14.1% |
PetIQ, Inc.
Reconciliation between Net Loss and Adjusted EBITDA
(Unaudited, in 000’s)
| For the three months ended | | For the year ended | ||||||||
| December 31, 2021 | | December 31, 2020 | | December 31, 2021 | | December 31, 2020 | ||||
Net loss | $ | (14,475) |
| $ | (10,123) |
| $ | (16,383) |
| $ | (85,727) |
Plus: |
|
| |
|
| |
|
| |
|
|
Tax expense | | 3,682 | | | (169) | | | 3,869 | | | 60,413 |
Depreciation | | 4,947 | | | 3,196 | | | 14,366 | | | 12,082 |
Amortization |
| 4,654 | |
| 4,502 | |
| 22,336 | |
| 12,815 |
Interest |
| 6,003 | |
| 6,347 | |
| 24,696 | |
| 22,807 |
EBITDA | $ | 4,811 | | $ | 3,753 | | $ | 48,884 | | $ | 22,390 |
Acquisition costs(1) | | — | | | 805 | | | 92 | | | 2,620 |
Loss on debt extinguishment and related costs(2) |
| — | |
| — | |
| 6,438 | | | — |
Stock based compensation expense | | 2,240 | | | 2,621 | | | 9,428 | | | 9,170 |
Non same-store net (income) loss (3) | | 6,229 | | | 4,951 | | | 23,159 | | | 16,354 |
Integration costs(4) | | 212 | | | 165 | | | (142) | | | 9,776 |
Litigation expenses | | 1,219 | | | 283 | | | 4,105 | | | 1,006 |
CFO Transition | | 597 | | | — | | | 928 | | | — |
COVID-19 related costs(5) | | — | | | 443 | | | — | | | 6,476 |
Adjusted EBITDA | $ | 15,308 | | $ | 13,021 | | $ | 92,892 | | $ | 67,792 |
Adjusted EBITDA Margin | | 7.8% | | | 7.9% | | | 10.0% | | | 8.7% |
| (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 out of pocket costs. |
| (3) | Non same-store revenue and costs relate to our Services Segment wellness centers 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. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. |
| (5) | Costs related to maintaining service segment infrastructure, staffing, and overhead related to 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 loss and adjusted net (loss) income
(Unaudited, in 000’s)
| Three Months Ended | | Year Ended | ||||||||
| December 31, 2021 | | December 31, 2020 | | December 31, 2021 | | December 31, 2020 | ||||
Net loss | $ | (14,475) |
| $ | (10,123) |
| $ | (16,383) |
| $ | (85,727) |
Plus: | | | | | | | | | | | |
Tax expense (benefit) | | 3,682 | | | (169) | | | 3,869 | | | 60,413 |
Acquisition costs(1) | | — | | | 805 | | | 92 | | | 2,620 |
Loss on debt extinguishment and related costs(2) | | — | | | — | | | 6,438 | | | — |
Stock based compensation expense | | 2,240 | | | 2,621 | | | 9,428 | | | 9,170 |
Non same-store adjustment(3) | | 6,229 | | | 4,951 | | | 23,159 | | | 16,354 |
Integration costs(4) | | 212 | | | 165 | | | (142) | | | 9,776 |
Litigation expenses | | 1,219 | | | 283 | | | 4,105 | | | 1,006 |
CFO Transition | | 597 | | | — | | | 928 | | | — |
COVID-19 related costs(5) | | — | | | 443 | | | — | | | 6,476 |
Adjusted Net income (loss) | $ | (296) | | $ | (1,024) | | $ | 31,494 | | $ | 20,088 |
| (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 out of pocket costs. |
| (3) | Non same-store revenue and costs relate to our Services Segment wellness centers 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. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. |
| (5) | Costs related to maintaining service segment infrastructure, staffing, and overhead related to 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.
Pro forma impact of loss of distribution
(Unaudited, in 000’s)
| | | For the Three Months Ended | | For the Year Ended | ||||
| | | March 31 | June 30 | September 30 | December 31 | | | December 31, 2021 |
Total net sales | | $ | 254,347 | 271,011 | 210,534 | 196,636 | | $ | 932,528 |
Lost Distribution | | | (20,250) | (11,830) | (3,510) | (480) | | | (36,070) |
Pro forma Net Sales | | | 234,097 | 259,181 | 207,024 | 196,156 | | | 896,458 |
| | | | | | | | | |
Total Adjusted EBITDA | | | 26,861 | 34,359 | 16,364 | 15,308 | | | 92,892 |
Lost Distribution | | | (1,012) | (592) | (175) | (24) | | | (1,803) |
Pro forma Adjusted EBITDA | | $ | 25,849 | 33,767 | 16,189 | 15,284 | | $ | 91,089 |