PetIQ, Inc. Reports Second Quarter 2022 Financial Results
Second Quarter 2022 Net Income Increased 16.0% to
Reports Adjusted EBITDA of Approximately
Provides Third Quarter 2022 Guidance and Updates 2022 Annual Outlook
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
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
Second quarter 2022 gross profit was
Selling, general and administrative expenses (“SG&A”) was
Net income was
Second quarter adjusted EBITDA was
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
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
Product segment adjusted EBITDA decreased 10.0% to
Services:
For the second quarter of 2022, Services segment net revenues were
Cash Flow and Balance Sheet
As of
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
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
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
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
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
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, 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
Condensed Consolidated Balance Sheets (Unaudited, in 000’s except for per share amounts) |
||||||||
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 | ||||||
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 authorized; 29,304 and 29,139 shares issued and outstanding, respectively |
29 | 29 | ||||||
Class B common stock, par value 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 |
Condensed Consolidated Statements of Operations (Unaudited, in 000’s, except for per share amounts) |
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
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 |
$ | 4,632 | $ | 4,026 | $ | 7,763 | $ | 6,059 | ||||||||
Net income per share attributable to |
||||||||||||||||
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 |
Condensed Consolidated Statements of Cash Flows (Unaudited, in 000’s) |
||||||||
For the Six Months Ended |
||||||||
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 |
||||||||||||
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 | ) | ||
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 |
Summary Segment Results (Unaudited, in 000’s) |
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
$'s in 000's | ||||||||||||||||
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 | ||||||||
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 | ||||||||||||||||
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 | % | ||||||||
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 | ||||||||||||||||
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 | % | ||||||||
Reconciliation between Net Income and Adjusted EBITDA (Unaudited, in 000’s) |
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For the Three Months Ended | For the Six Months Ended | |||||||||||||||
$'s in 000's | ||||||||||||||||
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 | % | ||||||||
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 | ||||||||||||||
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.
Source: PetIQ, Inc.