PetIQ, Inc. Reports Second Quarter Fiscal 2017 Financial Results
Second Quarter Net Sales Increase of 42.3% to
Generates Second Quarter Net Income of
“We are pleased to report strong second quarter financial results following a successful initial public offering in July,” said Cord Christensen, PetIQ’s Chief Executive Officer. “We generated net sales growth of 42% and we realized material operating margin expansion of 660 basis points demonstrating the significant leverage of our business model.”
Initial Public Offering
On
Presentation
This press release presents historical results for the periods presented, of
Second Quarter 2017 Financial Results
Net sales increased 42.3% to
Gross profit was
Operating income was
Net income was
Adjusted EBITDA increased
First Six Months of 2017 Financial Results
Net sales increased 36% to
Operating income was
Net Income was
Adjusted EBITDA increased
Balance Sheet
As of
Conference Call and Webcast
The Company will host a conference call and webcast where members of the executive management team will discuss these results with additional comments and details today at
A replay of the conference call will be archived on the Company’s website and telephonic playback will be available today at from
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, our dependency on a limited number of customers; our ability to implement our growth strategy effectively; our ability to achieve or sustain profitability; competition from veterinarians and others in our industry; failure of the Fairness to Pet Owners Act of 2017 to become law; 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 successfully grow our business through acquisitions; our ability to introduce new products and improve existing products; our failure to protect our intellectual property; costs associated with governmental regulation; risks related to our international operations; our ability to keep and retain key employees; and the risks set forth under the "Risk Factors' section of the final prospectus for
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,
EBITDA represents net income before interest, income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA plus loss on debt extinguishment, management fees and litigation expenses. Adjusted EBITDA adjusts for transactions that management does not believe are representative of our core ongoing business. Adjusted EBITDA is utilized by management: (i) as a factor in evaluating management's performance when determining incentive compensation and (ii) to evaluate the effectiveness of our business strategies. The Company presents EBITDA because it is a necessary component for computing Adjusted EBITDA. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends. In addition, you should be aware when evaluating EBITDA and Adjusted EBITDA 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 EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate EBITDA and Adjusted EBITDA in the same manner. Our management does not, and you should not, consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of EBITDA 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 EBITDA and Adjusted EBITDA to net income, the most comparable GAAP measure, in the financial tables that accompany this release.
| PetIQ, LLC. Balance sheet (unaudited, dollars in thousands) |
||||||||
| June 30, 2017 | December 31, 2016 | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 1,048 | $ | 767 | ||||
| Accounts receivable, net of allowance for doubtful accounts | 31,741 | 17,195 | ||||||
| Inventories | 42,805 | 34,232 | ||||||
| Supplier prepayments | 2,028 | 2,985 | ||||||
| Other current assets | 1,927 | 1,358 | ||||||
| Total current assets | 79,549 | 56,537 | ||||||
| Property, plant and equipment, net | 12,562 | 13,044 | ||||||
| Restricted cash and deposits | 250 | 250 | ||||||
| Other non-current assets | 3,406 | 2,826 | ||||||
| Intangible assets, net of accumulated amortization | 3,699 | 4,054 | ||||||
| Goodwill | 4,899 | 4,619 | ||||||
| Total assets | $ | 104,365 | $ | 81,330 | ||||
| Liabilities and member's equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 12,857 | $ | 9,333 | ||||
| Accrued wages payable | 1,497 | 1,100 | ||||||
| Accrued interest payable | 156 | 44 | ||||||
| Other accrued expenses | 1,680 | 277 | ||||||
| Current portion of long-term debt and capital leases | 2,553 | 2,321 | ||||||
| Total current liabilities | 18,743 | 13,075 | ||||||
| Non-current liabilities | ||||||||
| Long-term debt | 33,005 | 25,158 | ||||||
| Obligations under capital leases, less current installments | 425 | 434 | ||||||
| Deferred acquisition liability | — | 1,303 | ||||||
| Other non-current liabilities | 350 | 378 | ||||||
| Total non-current liabilities | 33,780 | 27,273 | ||||||
| Commitments and contingencies | ||||||||
| Equity | ||||||||
| Member's equity | 53,289 | 42,941 | ||||||
| Accumulated other comprehensive loss | (1,425 | ) | (1,940 | ) | ||||
| Total member's equity | 51,864 | 41,001 | ||||||
| Non-controlling interest | (22 | ) | (19 | ) | ||||
| Total equity | 51,842 | 40,982 | ||||||
| Total liabilities and equity | $ | 104,365 | $ | 81,330 | ||||
| PetIQ, LLC. Income Statement (unaudited, dollars in thousands) |
||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||||
| Net sales | $ | 87,178 | $ | 61,280 | $ | 154,207 | $ | 113,578 | ||||||||
| Cost of sales | 71,227 | 52,319 | 126,056 | 94,845 | ||||||||||||
| Gross profit | 15,951 | 8,961 | 28,151 | 18,733 | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | 9,277 | 8,302 | 16,682 | 16,365 | ||||||||||||
| Operating income/(loss) | 6,674 | 659 | 11,469 | 2,368 | ||||||||||||
| Interest expense | (535 | ) | (751 | ) | (999 | ) | (1,652 | ) | ||||||||
| Foreign currency gain/(loss), net | (72 | ) | 36 | (121 | ) | (85 | ) | |||||||||
| Loss on debt extinguishment | — | — | — | (993 | ) | |||||||||||
| Other income, net | 3 | 654 | — | 656 | ||||||||||||
| Total other expense, net | (604 | ) | (61 | ) | (1,120 | ) | (2,074 | ) | ||||||||
| Net income | 6,070 | 598 | 10,349 | 294 | ||||||||||||
| Net (loss)/income attributable to noncontrolling interest | (1 | ) | 1 | (3 | ) | 1 | ||||||||||
| Net income attributable to member | $ | 6,071 | $ | 597 | $ | 10,352 | $ | 293 | ||||||||
| Comprehensive income/(loss) | ||||||||||||||||
| Net income | $ | 6,070 | $ | 598 | $ | 10,349 | $ | 294 | ||||||||
| Foreign currency translation adjustment | 374 | (713 | ) | 515 | (1,056 | ) | ||||||||||
| Comprehensive income/(loss) | 6,444 | (115 | ) | 10,864 | (762 | ) | ||||||||||
| Comprehensive (loss)/income attributable to noncontrolling interest | (1 | ) | 1 | (3 | ) | 1 | ||||||||||
| Comprehensive income/(loss) attributable to member | $ | 6,445 | $ | (116 | ) | $ | 10,867 | $ | (763 | ) | ||||||
| PetIQ, LLC. Statement of Cash Flows (unaudited, dollars in thousands) |
||||||||
| |
||||||||
| June 30, 2017 | June 30, 2016 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 10,349 | $ | 294 | ||||
| Adjustments to reconcile net income to net cash used for operating activities | ||||||||
| Depreciation and amortization of intangible assets and loan fees | 1,687 | 2,141 | ||||||
| Loss on disposition of property | 14 | 49 | ||||||
| Foreign exchange loss on liabilities | 149 | 84 | ||||||
| Warranty settlement gain | — | (645 | ) | |||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (14,175 | ) | (8,318 | ) | ||||
| Inventories | (8,473 | ) | (8,744 | ) | ||||
| Prepaid expenses and other assets | (574 | ) | 1,261 | |||||
| Accounts payable | 3,603 | 3,052 | ||||||
| Accrued wages payable | 377 | (627 | ) | |||||
| Other accrued expenses | 54 | (230 | ) | |||||
| Net cash used in operating activities | (6,989 | ) | (11,683 | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds from disposition of property, plant, and equipment | — | — | ||||||
| Purchase of property, plant, and equipment and intangibles | (681 | ) | (1,130 | ) | ||||
| Net cash used in investing activities | (681 | ) | (1,130 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of long term debt | 150,000 | 129,602 | ||||||
| Principal payments on long term debt | (141,962 | ) | (125,150 | ) | ||||
| Change in restricted cash | — | 6,894 | ||||||
| Principal payments on capital lease obligations | (56 | ) | (41 | ) | ||||
| Payment of deferred financing fees and debt discount | (25 | ) | (218 | ) | ||||
| Net cash provided by financing activities | 7,957 | 11,087 | ||||||
| Net change in cash and cash equivalents | 287 | (1,726 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (6 | ) | (143 | ) | ||||
| Cash and cash equivalents, beginning of period | 767 | 3,250 | ||||||
| Cash and cash equivalents, end of period | $ | 1,048 | $ | 1,381 | ||||
| Supplemental cash flow information | ||||||||
| Interest paid | $ | 799 | $ | 1,486 | ||||
| Property, plant, and equipment acquired through accounts payable | (121 | ) | 90 | |||||
| Capital lease additions | 17 | 27 | ||||||
| PetIQ, LLC Reconciliation between net income and Adjusted EIBTDA (Unaudited, Dollars in Thousands) |
||||||||||||
| Three months ended | Six months ended | |||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
| Net income | $ | 6,070 | $ | 598 | $ | 10,349 | $ | 294 | ||||
| Plus | ||||||||||||
| Depreciation | $ | 575 | $ | 499 | $ | 1,111 | $ | 975 | ||||
| Amortization | 261 | 272 | 521 | 544 | ||||||||
| Interest | 535 | 751 | 999 | 1,652 | ||||||||
| EBITDA | $ | 7,441 | $ | 2,120 | $ | 12,980 | $ | 3,465 | ||||
| Loss on extinguishment and related costs | — | — | — | 993 | ||||||||
| Management fees | 196 | 181 | 386 | 300 | ||||||||
| Litigation expenses | — | 1,836 | — | 3,185 | ||||||||
| Adjusted EBITDA | $ | 7,637 | $ | 4,137 | $ | 13,366 | $ | 7,943 | ||||
| PetIQ, LLC Segment Review (Unaudited, Dollars in Thousands) |
||||||||||||
| Three months ended | Six months ended | |||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
| Net Sales | ||||||||||||
| Domestic | $ | 85,857 | $ | 60,095 | $ | 151,767 | $ | 111,279 | ||||
| International | 1,321 | 1,185 | 2,440 | 2,299 | ||||||||
| Net Sales | 87,178 | 61,280 | 154,207 | 113,578 | ||||||||
| Gross Profit | ||||||||||||
| Domestic | $ | 15,375 | $ | 8,493 | $ | 27,100 | $ | 17,759 | ||||
| International | 576 | 468 | 1,051 | 974 | ||||||||
| Gross Profit | 15,951 | 8,961 | 28,151 | 18,733 | ||||||||
| General and administrative expenses | ||||||||||||
| Domestic | $ | 8,819 | $ | 7,840 | $ | 15,768 | $ | 15,469 | ||||
| International | 458 | 462 | 914 | 896 | ||||||||
| General and administrative expenses | 9,277 | 8,302 | 16,682 | 16,365 | ||||||||
| Operating income | ||||||||||||
| Domestic | $ | 6,556 | $ | 653 | $ | 11,332 | $ | 2,290 | ||||
| International | 118 | 6 | 137 | 78 | ||||||||
| Operating income | 6,674 | 659 | 11,469 | 2,368 | ||||||||
CONTACT: Investor Relations Contact: ICR Katie Turner 646-277-1228 katie.turner@icrinc.com Media Relations Contact:Cory Ziskind ICR 646-277-1232 cory.ziskind@icrinc.com