PetIQ, Inc. Reports Record Second Quarter 2020 Financial Results
Consolidated Net Sales Increased 21.0% Year-Over-Year to
Outlines Services Segment Reopening Plan
Provides Third Quarter
“We are very proud of our record quarterly sales which are a testament to the strength of our team and the diversification of our business model. Growth in our Products segment fueled our quarterly results as the community clinics and wellness centers in our Services segment were temporarily closed during the quarter due to COVID-19,” commented
Second Quarter 2020 Highlights Compared to Prior Year Period
- Record second quarter net sales of
$267.0 million , an increase of 21.0%, despite Services segment closures related to COVID-19 - Product segment net sales of
$264.3 million , an increase of 35.8% - Services Segment net revenues of
$2.7 million compared to$26.0 million for the same period last year - Net loss of
$2.0 million compared to net income of$5.9 million in the prior year period, primarily due to$8.9 million of integration expenses;$4.4 million from COVID-19 impacts related to the temporary closure of more than 3,600 community clinics and 99 wellness centers in the Services segment, including direct labor costs as the Company continued to pay employees and$2 /hour incentive to frontline manufacturing and distribution workforce in the Products segment;$3.7 million of incremental interest expense; and$2.7 million of additional net non-same store loss contribution - Adjusted net income of
$17.1 million compared to adjusted net income of$15.8 million - Adjusted EBITDA of
$28.3 million , an increase of 35.9% - The Company generated
$26.2 million in excess cash from operations for the quarter - Closed the acquisition of the Capstar® portfolio of products on
July 31, 2020 - Giving effect to the
Capstar ® acquisition closing, the Company has total liquidity of approximately$102 million , and an additional$15 million available via an accordion feature of the credit agreement for a total of$117 million
Provides Update on Services Segment Reopening Plan
- As of today, the Company has re-opened 60% of its wellness centers and has piloted and started to re-open community clinics
- The Company expects to re-open approximately 95% of its community clinics and wellness centers by the end of the third quarter of 2020
- 27 new wellness centers under construction prior to the on-set of the pandemic are all expected to have grand openings in the fourth quarter of 2020
- Results from recent re-openings have demonstrated a quick return in customer traffic and average ticket to pre COVID-19 rates
- The Company instituted new sanitation, safety and support protocols since the closure of all service locations as a result of the pandemic to ensure that all locations once re-opened are able to remain in operation as an essential business through any future virus outbreaks
- Launched Telehealth Platform for community clinics and wellness centers to virtually provide pet health and wellness services to pet parents and their pets
Second Quarter 2020 Financial Results
Net sales increased 21.0% to
Second quarter 2020 gross profit was
Net loss was
Adjusted net income was
Second quarter adjusted EBITDA increased 35.9% to
Adjusted gross profit, adjusted net income and adjusted EBITDA are non-GAAP financial measures. The Company believes these non-GAAP financial measures provide investors with additional insight into the way management views reportable segment operations in light of changes in the Company’s operations, including the increase of manufacturing operations as a result of the Perrigo Animal Health Acquisition in the Products segment and the growth of the Company’s wellness centers, host partners, and regions within the Services segment. See “Non-GAAP Measures” for a definition of these measures and the financial tables that accompany this release for a reconciliation to the most comparable GAAP measure.
Segment Results
Products:
For the second quarter of 2020, Product segment net sales increased 35.8% to
All manufacturing and distribution facilities are fully operational and have maintained production and fill rates in excess of 99% since the onset of COVID-19. The Company paid an additional
Services:
For the second quarter of 2020, Services segment net revenues were
Cash Flow and Balance Sheet
As of
Working capital increased
Third Quarter Guidance
As previously announced, the Company’s annual guidance provided on
Based on these factors, the Company is providing third quarter 2020 guidance of:
- Consolidated net sales in the range of
$160 million to$170 million , including minimal contribution from the Services segment as it executes on its aforementioned re-opening plan during the quarter. - Adjusted EBITDA* in the range of
$15 million to$18 million . This third quarter guidance assumes very minimal contribution from the Services segment and theCapstar ® acquisition that closed onJuly 31, 2020 , due to seasonality that is consistent with PetIQ’s existing flea and tick business and on-hand inventory that the Company is carrying at its historical distributed product margin profile until the middle of September when the Company will first realize its advantageous manufactured margin profile for the Capstar® portfolio of products that are now under the Company’s ownership. The Company expects normal margin and contribution for the fourth quarter and beyond fromCapstar ®.
The Company continues to expect full year 2021 incremental EBITDA contribution from
*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 items. These items are not within the Company’s control and may vary greatly between periods and could significantly impact future financial results.
Conference Call and Webcast
The Company will host a conference call with members of the executive management team to discuss these results with additional comments and details. The conference call is scheduled to begin at
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
About
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could" and similar expressions. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, the impact of COVID-19 on our business and the global economy; our ability to successfully grow our business through acquisitions; our dependency on a limited number of customers; our ability to implement our growth strategy effectively; disruptions in our manufacturing and distribution chains; competition from veterinarians and others in our industry; reputational damage to our brands; economic trends and spending on pets; the effectiveness of our marketing and trade promotion programs; recalls or withdrawals of our products or product liability claims; our ability to manage our manufacturing and supply chain effectively; disruptions in our manufacturing and distribution chains; our ability to introduce new products and improve existing products; our failure to protect our intellectual property; costs associated with governmental regulation; our ability to keep and retain key employees; our ability to sustain profitability; and the risks set forth under the “Risk Factors” of our Annual Report on Form 10-K for the year ended
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
Adjusted net income consists of net income adjusted for tax expense, acquisition expenses, COVID-19 related costs, integration costs and costs of discontinued clinics, new clinic launch expense, and stock based compensation expense. Adjusted net Income is utilized by management: to evaluate the effectiveness of our business strategies.
Adjusted gross profit consists of gross profit adjusted for COVID-19 related costs, gross profit (loss) on veterinarian clinics and wellness centers that are not part of same store sales, and new clinic launch expense. Adjusted gross profit is utilized by management to evaluate the effectiveness of our business strategies.
EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA represents net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA plus adjustments for transactions that management does not believe are representative of our core ongoing business. Adjusted EBITDA margin is adjusted EBITDA stated as a percentage of net sales. Adjusted EBITDA is utilized by management: (i) as a factor in evaluating management's performance when determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) allow for improved comparability over prior periods due to significant growth in the Company’s new wellness centers. The Company presents EBITDA because it is a necessary component for computing adjusted EBITDA.
We believe that the use of adjusted net income, adjusted gross profit, adjusted EBITDA, and adjusted EBITDA margin provide additional tools for investors to use in evaluating ongoing operating results and trends. In addition, you should be aware when evaluating adjusted net income, adjusted gross profit, adjusted EBITDA and adjusted EBITDA margin, that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by these or other unusual or non-recurring items. Our computation of adjusted net income, adjusted gross profit, adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate adjusted net income, adjusted gross profit, adjusted EBITDA and adjusted EBITDA margin in the same manner. Our management does not, and you should not, consider adjusted net income, adjusted gross profit, adjusted EBITDA margin, or adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of adjusted net income, adjusted gross profit, adjusted EBITDA margin, and adjusted EBITDA is that they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. See a reconciliation of Non-GAAP measures to the most comparable GAAP measure, in the financial tables that accompany this release.
Definitions
- Community clinic – A community clinic is defined as an event, or a visit to a retail host partner location, by the Company’s veterinary staff utilizing the Company’s mobile service vehicles. Clinic locations and schedules vary by location and seasonally. Due to the non-standardization of the Company’s community clinics, these clinics are grouped as part of geographic regions. New regions and host partners are excluded from the same store sale calculation until they have six full consecutive quarters of operations.
- Wellness center – A wellness center is a physical fixed service location within the existing footprint of one of our retail partners. These wellness centers operate under a variety of brands based on the needs of our partner locations.
- Regional offices – Regional offices support the operations of the Company’s services segment which include its veterinarian community clinics and wellness centers. These offices are staffed with field management and other operational staff.
CONTACT:
Investor Relations Contact: | Media Relations Contact: |
ICR 646-277-1263 jeff.sonnek@icrinc.com |
ICR 646-277-1232 cory.ziskind@icrinc.com |
Condensed Consolidated Balance Sheets
(Unaudited, in 000’s except for per share amounts)
Current assets | ||||||||
Cash and cash equivalents | $ | 117,023 | $ | 27,272 | ||||
Accounts receivable, net | 145,323 | 71,377 | ||||||
Inventories | 111,300 | 79,703 | ||||||
Other current assets | 9,510 | 7,071 | ||||||
Total current assets | 383,156 | 185,423 | ||||||
Property, plant and equipment, net | 57,471 | 52,525 | ||||||
Operating lease right of use assets | 19,768 | 20,785 | ||||||
Deferred tax assets | 58,660 | 59,780 | ||||||
Other non-current assets | 1,955 | 3,214 | ||||||
Intangible assets, net | 115,362 | 119,956 | ||||||
230,658 | 231,045 | |||||||
Total assets | $ | 867,030 | $ | 672,728 | ||||
Liabilities and equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 91,492 | $ | 51,538 | ||||
Accrued wages payable | 10,950 | 9,082 | ||||||
Accrued interest payable | 1,198 | 83 | ||||||
Other accrued expenses | 13,017 | 3,871 | ||||||
Current portion of operating leases | 4,717 | 4,619 | ||||||
Current portion of long-term debt and finance leases | 3,855 | 3,821 | ||||||
Total current liabilities | 125,229 | 73,014 | ||||||
Operating leases, less current installments | 15,552 | 16,580 | ||||||
Long-term debt, less current installments | 357,795 | 251,376 | ||||||
Finance leases, less current installments | 2,840 | 3,331 | ||||||
Other non-current liabilities | 2,523 | 117 | ||||||
Total non-current liabilities | 378,710 | 271,404 | ||||||
Commitments and contingencies (Note 13) | ||||||||
Equity | ||||||||
Additional paid-in capital | 344,568 | 300,120 | ||||||
Class A common stock, par value |
24 | 23 | ||||||
Class B common stock, par value |
4 | 5 | ||||||
Accumulated deficit | (19,897 | ) | (15,903 | ) | ||||
Accumulated other comprehensive loss | (1,774 | ) | (1,131 | ) | ||||
Total stockholders' equity | 322,925 | 283,114 | ||||||
Non-controlling interest | 40,166 | 45,196 | ||||||
Total equity | 363,091 | 328,310 | ||||||
Total liabilities and equity | $ | 867,030 | $ | 672,728 | ||||
Condensed Consolidated Statements of (Loss) Income
(Unaudited, in 000’s, except for per share amounts)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
Product sales | $ | 264,307 | $ | 194,606 | $ | 430,587 | $ | 320,690 | ||||||||
Services revenue | 2,675 | 26,028 | 23,173 | 48,380 | ||||||||||||
Total net sales | 266,982 | 220,634 | 453,760 | 369,070 | ||||||||||||
Cost of products sold | 217,469 | 167,845 | 352,248 | 275,909 | ||||||||||||
Cost of services | 7,329 | 17,889 | 27,174 | 33,531 | ||||||||||||
Total cost of sales | 224,798 | 185,734 | 379,422 | 309,440 | ||||||||||||
Gross profit | 42,184 | 34,900 | 74,338 | 59,630 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative expenses | 38,492 | 24,450 | 70,182 | 44,988 | ||||||||||||
Contingent note revaluations gain | — | 1,460 | — | 780 | ||||||||||||
Operating income | 3,692 | 8,990 | 4,156 | 13,862 | ||||||||||||
Interest expense, net | (5,967 | ) | (2,242 | ) | (10,671 | ) | (4,179 | ) | ||||||||
Foreign currency gain (loss), net | 52 | 49 | 125 | (73 | ) | |||||||||||
Other income, net | 324 | 2 | 689 | 15 | ||||||||||||
Total other expense, net | (5,591 | ) | (2,191 | ) | (9,857 | ) | (4,237 | ) | ||||||||
Pretax net (loss) income | (1,899 | ) | 6,799 | (5,701 | ) | 9,625 | ||||||||||
Income tax (expense) benefit | (61 | ) | (881 | ) | 1,108 | (1,381 | ) | |||||||||
Net (loss) income | (1,960 | ) | 5,918 | (4,593 | ) | 8,244 | ||||||||||
Net (loss) income attributable to non-controlling interest | (69 | ) | 2,103 | (599 | ) | 2,818 | ||||||||||
Net (loss) income attributable to |
$ | (1,891 | ) | $ | 3,815 | $ | (3,994 | ) | $ | 5,426 | ||||||
Net (loss) income per share attributable to |
||||||||||||||||
Basic | $ | (0.08 | ) | $ | 0.17 | $ | (0.17 | ) | $ | 0.25 | ||||||
Diluted | $ | (0.08 | ) | $ | 0.17 | $ | (0.17 | ) | $ | 0.24 | ||||||
Weighted Average shares of Class A common stock outstanding | ||||||||||||||||
Basic | 24,425 | 22,365 | 24,077 | 22,087 | ||||||||||||
Diluted | 24,425 | 22,597 | 24,077 | 22,284 | ||||||||||||
Condensed Consolidated Statements of Cash Flows
(Unaudited, in 000’s)
For the Six Months Ended |
||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (4,593 | ) | $ | 8,244 | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities | ||||||||
Depreciation and amortization of intangible assets and loan fees | 11,797 | 6,056 | ||||||
Gain on disposition of property, plant, and equipment | (369 | ) | (62 | ) | ||||
Stock based compensation expense | 4,402 | 3,146 | ||||||
Deferred tax adjustment | (1,109 | ) | 1,638 | |||||
Contingent note revaluation | — | 780 | ||||||
Other non-cash activity | 65 | 56 | ||||||
Changes in assets and liabilities | ||||||||
Accounts receivable | (74,138 | ) | (40,218 | ) | ||||
Inventories | (31,627 | ) | (6,294 | ) | ||||
Other assets | (1,073 | ) | 1,250 | |||||
Accounts payable | 39,528 | 6,656 | ||||||
Accrued wages payable | 1,847 | 1,407 | ||||||
Other accrued expenses | 12,766 | (717 | ) | |||||
Net cash used in operating activities | (42,504 | ) | (18,058 | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from disposition of property, plant, and equipment | 429 | 69 | ||||||
Purchase of property, plant, and equipment | (10,425 | ) | (1,730 | ) | ||||
Net cash used in investing activities | (9,996 | ) | (1,661 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of convertible notes - liability component | 90,465 | — | ||||||
Proceeds from issuance of convertible notes - equity component | 53,285 | — | ||||||
Payment for Capped Call options | (14,821 | ) | — | |||||
Proceeds from issuance of long-term debt | 457,200 | 323,144 | ||||||
Principal payments on long-term debt | (438,874 | ) | (331,856 | ) | ||||
Payment of financing fees on Convertible Notes | (5,819 | ) | — | |||||
Tax distributions to LLC Owners | (46 | ) | (1,378 | ) | ||||
Principal payments on finance lease obligations | (761 | ) | (737 | ) | ||||
Payment of deferred financing fees and debt discount | (275 | ) | (50 | ) | ||||
Tax withholding payments on Restricted Stock Units | (186 | ) | — | |||||
Exercise of options to purchase class A common stock | 2,171 | 798 | ||||||
Net cash provided by (used in) financing activities | 142,339 | (10,079 | ) | |||||
Net change in cash and cash equivalents | 89,839 | (29,798 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (88 | ) | 2 | |||||
Cash and cash equivalents, beginning of period | 27,272 | 66,360 | ||||||
Cash and cash equivalents, end of period | $ | 117,023 | $ | 36,564 | ||||
Summary Segment Results
(Unaudited, in 000’s)
For the three months ended | For the six months ended | ||||||||||||||
$'s in 000's | |||||||||||||||
Services segment sales: | |||||||||||||||
Same-store sales | $ | 1,722 | $ | 23,873 | $ | 19,938 | $ | 44,709 | |||||||
Non same-store sales | 953 | 2,155 | 3,235 | 3,671 | |||||||||||
Net services segment sales | 2,675 | 26,028 | 23,173 | 48,380 | |||||||||||
Products segment sales | 264,307 | 194,606 | 430,587 | 320,690 | |||||||||||
Total net sales | 266,982 | 220,634 | 453,760 | 369,070 | |||||||||||
Adjusted EBITDA | |||||||||||||||
Products | 41,851 | 21,156 | 66,130 | 34,712 | |||||||||||
Services | 1,112 | 6,804 | 3,101 | 12,081 | |||||||||||
Unallocated Corporate | (14,657 | ) | (7,130 | ) | (26,467 | ) | (15,091 | ) | |||||||
Total Adjusted EBITDA | $ | 28,306 | $ | 20,831 | $ | 42,764 | $ | 31,703 | |||||||
Reconciliation between gross profit and adjusted gross profit
(Unaudited, in 000’s)
For the three months ended | For the six months ended | ||||||||||
Gross profit | $ | 42,184 | $ | 34,900 | $ | 74,338 | $ | 59,630 | |||
Plus: | |||||||||||
Non same-store gross loss(5) | 2,082 | 1,256 | 5,523 | 2,690 | |||||||
COVID-19 related costs | 2,996 | — | 2,996 | — | |||||||
Adjusted gross profit | $ | 47,262 | $ | 36,156 | $ | 82,857 | $ | 62,320 | |||
Reconciliation between Net (Loss) Income and Adjusted EBITDA
(Unaudited, in 000’s)
For the three months ended | For the six months ended | |||||||||||||||
Net income | $ | (1,960 | ) | $ | 5,918 | $ | (4,593 | ) | $ | 8,244 | ||||||
Plus: | ||||||||||||||||
Tax expense (benefit) | 61 | 881 | (1,108 | ) | 1,381 | |||||||||||
Depreciation | 2,983 | 1,529 | 5,856 | 3,183 | ||||||||||||
Amortization | 2,250 | 1,278 | 4,492 | 2,557 | ||||||||||||
Interest | 5,967 | 2,242 | 10,671 | 4,179 | ||||||||||||
EBITDA | $ | 9,301 | $ | 11,848 | $ | 15,318 | $ | 19,544 | ||||||||
Acquisition costs(1) | 146 | 2,889 | 732 | 3,465 | ||||||||||||
Stock based compensation expense | 1,844 | 1,602 | 4,402 | 3,146 | ||||||||||||
Non same-store revenue(2) | (953 | ) | (2,155 | ) | (3,235 | ) | (3,671 | ) | ||||||||
Non same-store costs(2) | 3,698 | 4,045 | 10,098 | 7,296 | ||||||||||||
Fair value adjustment of contingent note(3) | — | 1,460 | — | 780 | ||||||||||||
Integration costs and costs of discontinued clinics(4) | 8,850 | 1,142 | 9,304 | 1,142 | ||||||||||||
Clinic launch expenses(5) | 603 | — | 1,279 | — | ||||||||||||
Litigation expenses | 384 | — | 433 | — | ||||||||||||
COVID-19 related costs(6) | 4,433 | — | 4,433 | — | ||||||||||||
Adjusted EBITDA | $ | 28,306 | $ | 20,831 | $ | 42,764 | $ | 31,703 | ||||||||
Adjusted EBITDA Margin | 10.6 | % | 9.5 | % | 9.5 | % | 8.7 | % |
(1) | Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions. |
(2) | Non same-store revenue and costs relate to our Services segment and are from wellness centers, host partners, and regions with less than six full trailing quarters of operating results. |
(3) | Fair value adjustment on the contingent note represents the non-cash adjustment to mark the 2019 Contingent Note to fair value. |
(4) | Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses, such as personnel costs like severance and signing bonuses, consulting work, contract termination, and IT conversion costs. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. |
(5) | Clinic launch expenses relate to our Services segment and represent the nonrecurring costs to open new veterinary wellness centers, primarily employee costs, training, marketing, and rent prior to opening for business. |
(6) | Costs related to maintaining service segment infrastructure, staffing, and overhead related clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID. |
Reconciliation between net (loss) income and adjusted net income
(Unaudited, in 000’s)
Three Months Ended | Six Months Ended | |||||||||||||||
Net (loss) income | $ | (1,960 | ) | $ | 5,918 | $ | (4,593 | ) | $ | 8,244 | ||||||
Plus: | ||||||||||||||||
Tax expense (benefit) | 61 | 881 | (1,108 | ) | 1,381 | |||||||||||
Acquisition costs(1) | 146 | 2,889 | 732 | 3,465 | ||||||||||||
Integration costs and costs of discontinued clinics(2) | 8,850 | 1,142 | 9,304 | 1,142 | ||||||||||||
Stock based compensation expense | 1,844 | 1,602 | 4,402 | 3,146 | ||||||||||||
Fair value adjustment of contingent note(3) | — | 1,460 | — | 780 | ||||||||||||
Non same-store revenue(4) | (953 | ) | (2,155 | ) | (3,235 | ) | (3,671 | ) | ||||||||
Non same-store costs(4) | 3,698 | 4,045 | 10,098 | 7,296 | ||||||||||||
Clinic launch expenses(5) | 603 | — | 1,279 | — | ||||||||||||
Litigation expenses | 384 | — | 433 | — | ||||||||||||
COVID-19 related costs(6) | 4,433 | — | 4,433 | — | ||||||||||||
Adjusted Net income | $ | 17,106 | $ | 15,782 | $ | 21,745 | $ | 21,783 |
(1) | Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket costs related to completed and contemplated acquisitions. |
(2) | Non same-store revenue and costs relate to our Services segment and are from wellness centers, host partners, and regions with less than six full trailing quarters of operating results. |
(3) | Fair value adjustment on the contingent note represents the non-cash adjustment to mark the 2019 Contingent Note to fair value. |
(4) | Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses, such as personnel costs like severance and signing bonuses, consulting work, contract termination, and IT conversion costs. These costs are primarily in the Products segment and the corporate segment for personnel costs, legal and consulting expenses, and IT costs. |
(5) | Clinic launch expenses relate to our Services segment and represent the nonrecurring costs to open new veterinary wellness centers, primarily employee costs, training, marketing, and rent prior to opening for business. |
(6) | Costs related to maintaining service segment infrastructure, staffing, and overhead related clinics and wellness centers closed due to COVID-19 related health and safety initiatives. Product segment and unallocated corporate costs related to incremental wages paid to essential workers and sanitation costs due to COVID. |
Source: PetIQ, Inc.