0001558370-21-014669 | 10-Q | XBRL Viewer

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2021	Nov. 04, 2021
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2021
Entity File Number	001-38163
Entity Registrant Name	PetIQ, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	35-2554312
Entity Address, Address Line One	230 E. Riverside Dr.
Entity Address, City or Town	Eagle
Entity Address, State or Province	ID
Entity Address, Postal Zip Code	83616
City Area Code	208
Local Phone Number	939-8900
Title of 12(b) Security	Class A Common Stock, $0.001 par value
Trading Symbol	PETQ
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001668673
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		29,135,120
Class B common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		272,496

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 63,174	$ 33,456
Accounts receivable, net	124,270	102,755
Inventories	108,144	97,773
Other current assets	7,157	8,312
Total current assets	302,745	242,296
Property, plant and equipment, net	74,346	63,146
Operating lease right of use assets	20,940	20,122
Other non-current assets	2,134	1,870
Intangible assets, net	195,310	213,000
Goodwill	231,083	231,158
Total assets	826,558	771,592
Current liabilities
Accounts payable	62,510	68,131
Accrued wages payable	13,179	10,540
Accrued interest payable	5,108	903
Other accrued expenses	10,829	8,815
Current portion of operating leases	5,891	4,915
Current portion of long-term debt and finance leases	7,497	7,763
Total current liabilities	105,014	101,067
Operating leases, less current installments	15,857	15,789
Long-term debt, less current installments	438,406	403,591
Finance leases, less current installments	2,378	3,338
Other non-current liabilities	1,712	1,397
Total non-current liabilities	458,353	424,115
Equity
Additional paid-in capital	361,836	319,642
Accumulated deficit	(100,401)	(98,558)
Accumulated other comprehensive loss	(825)	(686)
Total stockholders' equity	260,639	220,427
Non-controlling interest	2,552	25,983
Total equity	263,191	246,410
Total liabilities and equity	826,558	771,592
Class A common stock
Equity
Common stock value	$ 29	26
Class B common stock
Equity
Common stock value		$ 3

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Total net sales	$ 210,534	$ 162,083	$ 735,892	$ 615,843
Total cost of sales	168,462	129,815	586,393	509,237
Gross profit	42,072	32,268	149,499	106,606
Operating expenses
General and administrative expenses	45,252	35,562	129,066	105,744
Operating income (loss)	(3,180)	(3,294)	20,433	862
Interest expense, net	(6,168)	(6,427)	(18,693)	(16,460)
Foreign currency (loss) income, net	6	(251)	(98)	(126)
Loss on debt extinguishment			(5,453)
Other income, net	1,331	13	2,090	702
Total other expense, net	(4,831)	(6,665)	(22,154)	(15,884)
Pretax net loss	(8,011)	(9,959)	(1,721)	(15,022)
Income tax expense	(317)	(61,563)	(187)	(60,582)
Net loss	(8,328)	(71,522)	(1,908)	(75,604)
Net loss attributable to non-controlling interest	(426)	(1,272)	(65)	(1,775)
Net loss attributable to PetIQ, Inc. - basic and diluted	$ (7,902)	$ (70,250)	$ (1,843)	$ (73,829)
Net loss per share attributable to PetIQ, Inc. Class A common stock
Basic	$ (0.27)	$ (2.82)	$ (0.07)	$ (3.03)
Diluted	$ (0.27)	$ (2.82)	$ (0.07)	$ (3.03)
Weighted Average shares of Class A common stock outstanding
Basic	28,940	24,935	27,949	24,365
Diluted	28,940	24,935	27,949	24,365
Product
Total net sales	$ 181,557	$ 150,063	$ 654,448	$ 580,650
Total cost of sales	142,009	116,847	510,673	469,095
Services
Total net sales	28,977	12,020	81,444	35,193
Total cost of sales	$ 26,453	$ 12,968	$ 75,720	$ 40,142

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Comprehensive Income
Net loss	$ (8,328)	$ (71,522)	$ (1,908)	$ (75,604)
Foreign currency translation adjustment	(711)	451	(207)	(227)
Comprehensive loss	(9,039)	(71,071)	(2,115)	(75,831)
Comprehensive loss attributable to non-controlling interest	(436)	(1,206)	(68)	(1,804)
Comprehensive loss attributable to PetIQ	$ (8,603)	$ (69,865)	$ (2,047)	$ (74,027)

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities
Net loss	$ (1,908)	$ (75,604)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization of intangible assets and loan fees	28,936	18,902
Loss on debt extinguishment	5,453
Gain on disposition of property, plant, and equipment	(1,185)	(363)
Stock based compensation expense	7,188	6,549
Deferred tax adjustment		60,582
Termination of supply agreement		7,801
Other non-cash activity	133	143
Changes in assets and liabilities
Accounts receivable	(21,910)	(29,777)
Inventories	(10,040)	(3,993)
Other assets	(883)	3,449
Accounts payable	(4,498)	15,824
Accrued wages payable	2,664	3,443
Other accrued expenses	6,515	6,863
Net cash provided by operating activities	10,465	13,819
Cash flows from investing activities
Proceeds from disposition of property, plant, and equipment	5,055	429
Purchase of property, plant, and equipment	(24,577)	(16,811)
Purchase of Capstar and related intangibles		(96,072)
Net cash used in investing activities	(19,522)	(112,454)
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	630,568	668,675
Principal payments on long-term debt	(595,321)	(668,511)
Payment of financing fees on Convertible Notes		(5,884)
Tax distributions to LLC Owners	(70)	(46)
Principal payments on finance lease obligations	(1,573)	(1,252)
Payment of deferred financing fees and debt discount	(6,454)	(550)
Tax withholding payments on Restricted Stock Units	(901)	(313)
Exercise of options to purchase class A common stock	12,617	8,188
Net cash provided by financing activities	38,866	129,236
Net change in cash and cash equivalents	29,809	30,601
Effect of exchange rate changes on cash and cash equivalents	(91)	(120)
Cash and cash equivalents, beginning of period	33,456	27,272
Cash and cash equivalents, end of period	63,174	57,753
Supplemental cash flow information
Interest paid	12,151	12,311
Net change in property, plant, and equipment acquired through accounts payable	889	874
Finance lease additions	544	993
Finance leases	141	993
Net change of deferred tax asset from step-up in basis		(8,134)
Income taxes paid, net of refunds	282	63
Accrued tax distribution	$ 7	$ (443)

Condensed Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Class A common stock Common Stock	Class B common stock Common Stock	Accumulated Deficit	Accumulated Other Comprehensive Loss	Additional Paid-In Capital	Non-controlling Interest	Total
Beginning Balance at Dec. 31, 2019	$ 23	$ 5	$ (15,903)	$ (1,131)	$ 300,120	$ 45,196	$ 328,310
Beginning Balance (in shares) at Dec. 31, 2019	23,554	4,752
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 2	$ (2)		82	11,806	(11,888)
Exchange of LLC Interests held by LLC Owners (in shares)	1,332	(1,332)
Accrued tax distributions						443	443
Other comprehensive income (loss)				(198)		(29)	(227)
Stock based compensation expense					5,610	939	6,549
Payment for capped call share options					(12,696)	(2,125)	(14,821)
Exercise of Options to purchase Common Stock					8,188		8,188
Exercise of Options to purchase Common Stock (in shares)	345
Issuance of stock for vesting of RSU's, net of tax with holdings					(313)		(313)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	25
Net loss			(73,829)			(1,775)	(75,604)
Ending Balance at Sep. 30, 2020	$ 25	$ 3	(89,732)	(1,247)	312,714	30,761	252,523
Ending Balance (in shares) at Sep. 30, 2020	25,256	3,420
Beginning Balance at Dec. 31, 2019	$ 23	$ 5	(15,903)	(1,131)	300,120	45,196	$ 328,310
Beginning Balance (in shares) at Dec. 31, 2019	23,554	4,752
Increase (Decrease) in Stockholders' Equity
Exercise of Options to purchase Common Stock (in shares)							395
Ending Balance at Dec. 31, 2020	$ 26	$ 3	(98,558)	(686)	319,642	25,983	$ 246,410
Ending Balance (in shares) at Dec. 31, 2020	25,711	3,040
Beginning Balance at Jun. 30, 2020	$ 24	$ 4	(19,482)	(1,774)	307,672	34,041	320,484
Beginning Balance (in shares) at Jun. 30, 2020	24,658	3,770
Increase (Decrease) in Stockholders' Equity
Other comprehensive income prior to IPO				385		66	451
Accrued tax distribution prior to recapitalization						752	752
Exchange of LLC Interests held by LLC Owners	$ 1	$ (1)		142	3,074	(3,216)
Exchange of LLC Interests held by LLC Owners (in shares)	350	(350)
Net increase in deferred tax asset from LLC Interest transactions					(5,786)		(5,786)
Stock based compensation expense					1,874	273	2,147
Payment for capped call share options					(116)	116
Exercise of Options to purchase Common Stock					6,017		6,017
Exercise of Options to purchase Common Stock (in shares)	245
Issuance of stock for vesting of RSU's, net of tax with holdings					(21)		(21)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	3
Net loss			(70,250)			(1,272)	(71,522)
Ending Balance at Sep. 30, 2020	$ 25	$ 3	(89,732)	(1,247)	312,714	30,761	252,523
Ending Balance (in shares) at Sep. 30, 2020	25,256	3,420
Beginning Balance at Dec. 31, 2020	$ 26	$ 3	(98,558)	(686)	319,642	25,983	246,410
Beginning Balance (in shares) at Dec. 31, 2020	25,711	3,040
Increase (Decrease) in Stockholders' Equity
Exchange of LLC Interests held by LLC Owners	$ 3	$ (3)		66	23,593	(23,659)
Exchange of LLC Interests held by LLC Owners (in shares)	2,748	(2,748)
Accrued tax distributions						(7)	(7)
Other comprehensive income (loss)				(205)		(3)	(208)
Stock based compensation expense					6,885	303	7,188
Exercise of Options to purchase Common Stock					12,617		$ 12,617
Exercise of Options to purchase Common Stock (in shares)	533						533
Issuance of stock for vesting of RSU's, net of tax with holdings					(901)		$ (901)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	73
Net loss			(1,843)			(65)	(1,908)
Ending Balance at Sep. 30, 2021	$ 29		(100,401)	(825)	361,836	2,552	263,191
Ending Balance (in shares) at Sep. 30, 2021	29,065	292
Beginning Balance at Jun. 30, 2021	$ 29		(92,499)	(126)	358,506	3,714	269,624
Beginning Balance (in shares) at Jun. 30, 2021	28,909	425
Increase (Decrease) in Stockholders' Equity
Other comprehensive income prior to IPO				(702)		(10)	(712)
Accrued tax distribution prior to recapitalization						1	1
Exchange of LLC Interests held by LLC Owners				3	769	(772)
Exchange of LLC Interests held by LLC Owners (in shares)	133	(133)
Stock based compensation expense					2,581	46	2,627
Exercise of Options to purchase Common Stock					29		29
Exercise of Options to purchase Common Stock (in shares)	2
Issuance of stock for vesting of RSU's, net of tax with holdings					(49)		(49)
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares)	21
Net loss			(7,902)			(426)	(8,328)
Ending Balance at Sep. 30, 2021	$ 29		$ (100,401)	$ (825)	$ 361,836	$ 2,552	$ 263,191
Ending Balance (in shares) at Sep. 30, 2021	29,065	292

Principal Business Activity and Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Principal Business Activity and Significant Accounting Policies

Principal Business Activity and Significant Accounting Policies

PetIQ Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

Note 1 – Principal Business Activity and Significant Accounting Policies

Principal Business Activity and Principles of Consolidation

PetIQ, Inc. (“PetIQ,” the “Company,” “we” or “us”) 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. We engage with customers through more than 60,000 points of distribution across retail, including veterinary, channels with our branded distributed medications, which is further supported by our own world-class medication manufacturing facility in Omaha, Nebraska. Our national service platform, VIP Petcare (“VIP”), operates in over 2,900 retail partner locations in 41 states, providing cost effective and convenient veterinary wellness services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can give them.

We have two reporting segments: (i) Products; and (ii) Services. The Products segment consists of our manufacturing and distribution business. The Services segment consists of veterinary services and related product sales provided by the Company directly to consumers.

We are the sole managing member of PetIQ Holdings, LLC (“HoldCo”), a Delaware limited liability company, which is the sole member of PetIQ, LLC (“Opco”) and, through Holdco, operate and control all of the business and affairs of Opco.

The condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020 are unaudited. The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2020 and related notes thereto included in the most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant, and equipment and intangible assets; the valuation of property, plant, and equipment, intangible assets and goodwill, the valuation of assets and liabilities in connection with acquisitions, the valuation of deferred tax assets, the valuation of inventories, and reserves for legal contingencies.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are at cost, which approximates fair value due to their relatively short maturities. Our term loan and revolving credit facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amounts approximate fair value.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the date of acquisition. All credit card, debit card and electronic transfer transactions that process in less than seven days are classified as cash and cash equivalents. The Company maintains its cash accounts in various deposit accounts, the balances of which at times exceeded federal deposit insurance limits during the periods presented.

Receivables and Credit Policy

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 45 days from the invoice date. Accounts receivable are stated at the amount billed to the customer, net of discounts and estimated deductions. The Company does not have a policy for charging interest on overdue customer account balances. The Company provides an allowance for credit losses equal to expected losses. The Company’s estimate is based on historical collection experience, a review of the current status of trade accounts receivable and known current economic conditions including the current and expected impact of COVID-19. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice.

Other receivables consists of various receivables due from vendors, banking partners, and other receivable from business partners.

Accounts receivable, net consists of the following as of:


$'s in 000's	September 30, 2021		December 31, 2020
Trade receivables	$	116,187	$	96,381
Other receivables		8,416		7,094
		124,603		103,475
Less: Allowance for doubtful accounts		(333)		(720)
Total accounts receivable, net	$	124,270	$	102,755

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in first-out (“FIFO”) method and includes estimated rebate amounts. The Company maintains reserves for estimated obsolete or unmarketable inventory based on the difference between the cost of inventory and its estimated net realizable value. In estimating the reserves, management considers factors such as excess or slow-moving inventories, product expiration dating, and market conditions. Changes in these conditions may result in additional reserves. Major components of inventories consist of the following as of:


$'s in 000's	September 30, 2021		December 31, 2020
Raw materials	$	21,830	$	15,761
Work in progress		1,854		2,273
Finished goods		84,460		79,739
Total inventories	$	108,144	$	97,773

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Expenditures for improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Depreciation and amortization is provided using the straight-line method, based on estimated useful lives of the assets, except for leasehold improvements and finance leased assets which are depreciated over the shorter of the expected useful life or the lease term. Depreciation and amortization expense is recorded in cost of sales and general and administrative expenses in the condensed consolidated statements of operations, depending on the use of the asset. The estimated useful lives of property, plant, and equipment are as follows:


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			2-15 years
Furniture and fixtures			5-10 years

Convertible Debt

On May 19, 2020, we issued $143.8 million aggregate principal amount of Convertible Notes due 2026 (the “Notes”). See Note 5 – “Debt.” Simultaneously, with the issuance of the Notes, we bought capped call options from certain financial institutions to minimize the impact of potential dilution of our Class A common stock upon conversion of the Notes. The premium for the capped call options was recorded as additional paid-in capital in our condensed consolidated balance sheets as the options are settleable in our Class A common stock.

Effective January 1, 2021, we adopted ASU 2020-06 using the full retrospective approach. As a result of this adoption, we have de-recognized the debt discount on the Notes and therefore no longer recognize any amortization of debt discount on the Notes as interest expense (see below, Adopted Accounting Standard Update).

Revenue Recognition

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are product sales and the delivery of veterinary services.

Revenue is generally recognized for product sales on a point in time basis when product control is transferred to the customer. In general, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time.

The Company determined that certain products manufactured to a customer’s specifications do not have an alternative future use at a reasonable profit margin due to costs associated with reworking, transporting and repackaging these products. These products are produced subject to purchase orders that include an enforceable right to payment. Therefore, the Company determined that revenue on these products would be recognized over time, as the products are produced. This represents a minor subset of the products the Company manufactures.

Revenue for services is recognized over time as the service is delivered, typically over a single day. Payment is typically rendered at the time of service. Customer contracts generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, we allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.

The performance obligations in our contracts are satisfied within one year. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of September 30, 2021.

Variable Consideration

In addition to fixed contract consideration, most contracts include some form of variable consideration. The most common forms of variable consideration include discounts, rebates, and sales returns and allowances. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe therefore not requiring any additional constraint on the variable consideration.

Trade marketing expense, consisting primarily of customer pricing allowances and merchandising funds are offered through various programs to customers and are designed to promote our products. They include the cost of in-store product displays, feature pricing in retailers' advertisements and other temporary price reductions. These programs are offered to our customers both in fixed and variable (rate per case) amounts. The ultimate cost of these programs depends on retailer performance and is subject to management estimates.

Certain retailers require the payment of product introductory fees in order to obtain space for the Company's products on the retailer's store shelves. This cost is typically a lump sum and is determined using the expected value based on the contract between the two parties.

Both trade marketing expense and product introductory fees are recognized as reductions of revenue at the time the transfer of control of the associated products occurs. Accruals for expected payouts, or amounts paid in advance, under these programs are included as accounts payable or other current assets in the condensed consolidated balance sheets.

Significant Payment Terms

Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, no terms beyond one year are granted at contract inception. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less.

Shipping

All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in the cost of sales. This includes shipping and handling costs after control over a product has transferred to a customer.

Warranties & Returns

PetIQ provides all customers with a standard or assurance type warranty. Either stated or implied, the Company provides assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No significant services beyond an assurance warranty are provided to customers.

The Company does not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience.

Contract balances

Contract asset and liability balances as of September 30, 2021 and 2020 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances.

Cost of Services

Cost of Services are comprised of all service and product costs related to the delivery of veterinary services, including but not limited to, salaries and contract costs of veterinarians, technicians and other clinic based personnel, transportation and delivery costs, rent, occupancy costs, supply costs, depreciation and amortization of clinic assets, certain marketing and promotional expenses and costs of goods sold.

Research and Development and Advertising Costs

Research and development and advertising costs are expensed as incurred and are included in general and administrative expenses. Research and development costs amounted to $3.2 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively, and $5.2 million and $2.5 million for the nine months ended September 30, 2021 and 2020, respectively. Advertising costs were $5.4 million and $5.8 million for the three months ended September 30, 2021 and 2020, respectively, and $12.9 million and $8.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Collaboration Agreements

Through our acquisition of Perrigo Animal Health, we entered into a product development and asset purchase agreement with a third party for certain product formulations in development by the third party. During the nine months ended September 30, 2021, the Company opted out of the arrangement for two of the product formulations, which reduced the amount of any potential payments under the agreement. The Company may make up to $5.8 million of payments over the course of the next several years contingent on achievement of certain development and regulatory approval milestones on the remaining product formulation in development. Product development costs are expensed as incurred or as milestone payments become probable. There can be no assurance that these products will be approved by the U.S. Food and Drug Administration (“FDA”) on the anticipated schedule or at all. Consideration paid after FDA approval will be capitalized and amortized to cost of goods sold over the economic life of each product. The expenses paid prior to FDA approval will be included in general and administrative expenses on the condensed consolidated statements of operations. The Company accrued $2.0 million in research and development expense within accounts payable in the condensed consolidated balance sheets related to the agreement as a milestone was determined to be probable during the three and nine months ended September 30, 2021. There were no expenses incurred under the agreement for the nine months ended September 30, 2020.

Accounting for Income Taxes

The Company uses the asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred taxes are measured using rates expected to apply to taxable income in years in which those temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. We have recorded a valuation allowance against our deferred tax assets. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would release the valuation, which would be recorded as a reduction to income tax expense in the consolidated statements of operations.

The Company uses a two-step process for the measurement of uncertain tax positions that have been taken or are expected to be taken in a tax return. The first step is a determination of whether the tax position should be recognized in the consolidated financial statements. The second step determines the measurement of the tax position. The Company records potential interest and penalties on uncertain tax positions as a component of income tax expense.

Non-controlling interest

The non-controlling interests on the condensed consolidated statements of operations represents the portion of earnings or loss attributable to the economic interest in the Company’s subsidiary, Holdco, held by the non-controlling holders of Class B common stock and limited liability company interests in Holdco. Non-controlling interests on the condensed consolidated balance sheet represents the portion of net assets of the Company attributable to the non-controlling holders of Class B common stock and Limited Liability Company interests in Holdco. As of September 30, 2021 and December 31, 2020 the non-controlling interest was approximately 1.0% and 10.6%, respectively of ownership of LLC Interests.

Litigation

The Company is subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. If the likelihood of an adverse legal outcome is determined to be probable and the amount of loss is estimable, then a liability is accrued in accordance with accounting guidance for Contingencies. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. The Company consults with both internal and external legal counsel related to litigation.

Adopted Accounting Standard Updates

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant of which is requiring the use of the if-converted method for diluted EPS calculation. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the ASU can either be on a modified retrospective or full retrospective basis.

On January 1, 2021, we adopted the ASU using the full retrospective method. Under the full retrospective method, the prior period condensed consolidated financial statements have been retrospectively adjusted to reflect the adoption of the accounting standard in those periods The following tables show the impact of the adoption on our condensed consolidated balance sheet and condensed consolidated statement of operations.


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Three Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(7,829)	$	1,402	$	(6,427)
	Tax expense		(53,168)		(8,395)		(61,563)

Net loss			(64,529)		(6,993)		(71,522)


			For the Nine Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(18,500)	$	2,040	$	(16,460)
	Tax expense		(52,060)		(8,522)		(60,582)

Net loss			(69,122)		(6,482)		(75,604)

Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2021

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Note 4 – Intangible Assets and Goodwill

Intangible assets consist of the following at:


$'s in 000's	Useful Lives	September 30, 2021		December 31, 2020
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		160,160		160,178
Patents and processes	5-10 years		14,879		14,905
Brand names	5-15 years		24,727		24,740
Total amortizable intangibles			200,116		200,173
Less accumulated amortization			(39,815)		(25,984)
Total net amortizable intangibles			160,301		174,189
Non-amortizable intangibles
Trademarks and other			33,341		33,341
In-process research and development			1,668		5,470
Intangible assets, net of accumulated amortization		$	195,310	$	213,000

Certain intangible assets are denominated in currencies other than the U.S. Dollar; therefore, their gross and net carrying values are subject to foreign currency movements. Amortization expense for the three months ended September 30, 2021 and 2020 was $4.6 million and $3.8 million, respectively, and $17.7 million and $8.3 million for the nine months ended September 30, 2021 and 2020, respectively.

The in-process research and development (“IPRD”), intangible assets represent the value assigned to three acquired R&D projects that principally represent rights to develop and sell products that the Company has acquired which has not yet been completed or approved. The IPRD acquired as part of the Perrigo Animal Health Acquisition is accounted for as an indefinite-lived asset until the product is available for sale and regulatory approval is obtained, or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed, the IPRD would be amortized over its then estimated useful life. The fair value of the IPRD was estimated using the multi-period excess earnings income method. The projected cash flows estimates for the future products were based on certain key assumptions including estimates of future revenues and expenses, taking into account the stage of development at the acquisition date and the resources needed to complete development. In the event that the efforts are not successful, the Company will write off the relevant IPRD in the period in which it is no longer considered feasible. During the nine months ended September 30, 2021, the Company opted out of two of the acquired projects, effectively abandoning the associated research and development efforts. Accordingly, the Company wrote off the associated IPRD assets of $3.8 million, the expense for which is included as amortization expense in general and administrative expenses on the condensed consolidated statement of operations for the nine months ended September 30, 2021.

Estimated future amortization expense for each of the following years is as follows:


Years ending December 31, ($'s in 000's)
Remainder of 2021	$	4,627
2022		17,965
2023		16,919
2024		14,553
2025		13,893
Thereafter		92,344

The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2020 to September 30, 2021:


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2020		183,781		47,264		231,045
Foreign currency translation		113		—		113
Goodwill as of December 31, 2020		183,894		47,264		231,158
Foreign currency translation		(75)		—		(75)
Goodwill as of September 30, 2021	$	183,819	$	47,264	$	231,083

Debt

9 Months Ended

Sep. 30, 2021

Debt

Debt

Note 5 – Debt

On April 13, 2021, the Company entered into a new $300 million term loan (“Term Loan B”) and a $125 million new asset-based revolving line of credit (“ABL”), collectively referred to as the (“credit facilities”).

The credit facilities replace both the Amended Revolving Credit Agreement and A&R Term Loan Agreement as well as fully repay $27.5 million of the unsecured VIP Seller Notes.

As part of the termination of the Amended Revolving Credit Agreement, the A&R Term Loan Credit agreement, and the VIP Notes, the Company wrote off $5.5 million in deferred financing fees to loss on debt extinguishment and incurred an additional $0.9 million in costs related to the transaction which are included in general and administrative expenses

Senior Secured Asset-Based Revolving Credit Facility

On April 13, 2021, Opco entered into an asset-based credit agreement with KeyBank National Association, as administrative agent and collateral agent, and the lenders’ party thereto, that provides senior secured financing of $125.0 million (which may be increased by up to $50.0 million in certain circumstances), subject to a borrowing base limitation. The borrowing base for the ABL Facility at any time equals the sum of: (i) 90% of eligible investment-grade accounts; plus (ii) 85% of eligible other accounts; plus, (iii) 85% of the net orderly liquidation value of the cost of certain eligible on-hand and in-transit inventory; plus, (iv) at the option of Opco, 100% of qualified cash; minus (v) reserves. The ABL Facility bears interest at a variable rate plus a margin, with the variable rate being based on a base rate or LIBOR at the option of the Company. The rate at September 30, 2021 was 2.37%. The Company also pays a commitment fee on unused borrowings at a rate of 0.35%.

The ABL is secured by the assets of the Company including a first-priority security interest in personal property consisting of accounts receivable, inventory, cash, and deposit accounts. The ABL contains certain negative covenants that restrict the Company’s ability to incur additional indebtedness, pay dividends, make investments, loans, and acquisitions, among other restrictions.

Senior Secured Term Loan Facility

On April 13, 2021, Opco entered into a term credit and guaranty agreement with Jefferies Finance LLC, as administrative agent and collateral agent, and the lenders’ party thereto, that provides senior secured term loans of $300.0 million (which may be increased in certain circumstances). The Term Loan B bears interest at a variable rate of either prime, federal funds effective rate or LIBOR, plus an applicable margin of between 3.25% and 4.25% depending on the underlying base rate. LIBOR rates are subject to a 0.50% floor. The interest rate at September 30, 2021 was 4.75%. The Term Loan B requires quarterly payments of 0.25% of the original principal amount, with the balance due on the seventh anniversary of the closing date.

The credit agreement governing the Term Loan B does not require Opco to comply with any financial maintenance covenants but additionally contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default.

Convertible Notes

On May 19, 2020, the Company issued $143.8 million in aggregate principal amount of 4.00% Convertible Senior Notes due 2026 (the “Notes”) pursuant to the indenture (the “Indenture”), dated as of May 19, 2020. The total net proceeds from the Notes offering, after deducting debt issuance costs paid or payable by us, was $137.9 million. The Notes accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes will mature on June 1, 2026, unless earlier repurchased, redeemed or converted. Before January 15, 2026, holders will have the right to convert their Notes only upon the occurrence of certain events. From and after January 15, 2026, holders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Class A common stock, or a combination of cash and shares of its Class A common stock, at its election. The initial conversion rate is 33.7268 shares of Class A common stock per $1,000 principal amount of Notes. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s Class A common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling

any Notes will constitute a Make-Whole Fundamental Change with respect to such Notes, which will result in an increase to the conversion rate if such Notes are converted after they are called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A common stock.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The Notes contain customary events of default.

The fair value of the Notes was $171.8 million as of September 30, 2021. The estimated fair value of the Notes is based on market rates and the closing trading price of the Convertible Notes as of September 30, 2021 and is classified as Level 2 in the fair value hierarchy.

Amended & Restated Credit Agreement

The Amended Revolving Credit Agreement provides for a secured revolving credit facility of $125 million that matures on July 8, 2024. The borrowers under the Amended Revolving Credit Facility incur fees between 0.375% and 0.50% as unused facility fees, dependent on the aggregate amount borrowed. On May 14, 2020, the Company amended the Amended Revolving Credit Agreement to allow for the Notes described above. Additionally the amendment instituted a Eurodollar floor of 1% to the agreement.

All obligations under the Amended Revolving Credit Agreement are unconditionally guaranteed by HoldCo and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the Amended Revolving Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of each borrower and guarantor under the Amended Revolving Credit Agreement, subject to certain exceptions.

As of September 30, 2021 Amended Revolving Credit Agreement was fully repaid and terminated.

Amended & Restated Term Loan Credit Agreement

OpCo entered into an Amended and Restated Term Loan Credit Agreement on July 8, 2019 (the “A&R Term Loan Credit Agreement”). The $220.0 million A&R Term Loan Credit Agreement has an interest rate equal to the Eurodollar rate plus 5.00%. The A&R Term Loan Credit Agreement calls for 1% of the original loan balance to be paid annually via equal quarterly payments, with the balance of the loan due on the sixth anniversary of the agreement.

All obligations under the A&R Term Loan Credit Agreement are unconditionally guaranteed by PetIQ Holdings, LLC and each of its domestic wholly-owned subsidiaries and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the A&R Term Loan Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of PetIQ, LLC and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions.

As of September 30, 2021 the A&R Term Loan Credit Agreement was fully repaid and terminated.

General Other Debt

The Company entered into a mortgage with a local bank to finance a commercial building in Eagle, Idaho, in July 2017. The mortgage bears interest at a fixed rate of 4.35% and utilizes a 25 year amortization schedule with a 10 year balloon payment of the balance due at that time. As described in Note 3, the Company entered into an agreement to sell the commercial building in Eagle, Idaho, which closed in the third quarter of 2021. The Company used the proceeds from the sale to repay the mortgage on August 2, 2021.

In July 2020, the Company entered into the Agreement. See Note 2 – “Asset Acquisitions”. The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1.0 million per quarter thereafter with no interest. The Company discounted the payment stream using a market interest rate of 8.3%, resulting in an obligation of $17.5 million at the time it was entered into.

In connection with the acquisition of Community Veterinary Clinics, LLC d/b/a, VIP Petcare (the “VIP Acquisition”), the Company entered into a guarantee note of $10.0 million and contingent Notes that were subsequently earned. As of December 31, 2020 $7.5 million was payable pursuant to the 2018 Contingent Note and $10.0 million was payable pursuant to the 2019 Contingent Note. The guarantee note and the Contingent Notes, collectively, “Notes Payable – VIP Acquisition” of $27.5 million required quarterly interest payments of 6.75% with the balance payable July 17, 2023. These Notes Payable – VIP Acquisition were fully repaid in April 2021.

The following represents the Company’s long-term debt as of:


$'s in 000's	September 30, 2021		December 31, 2020
Convertible Notes	$	143,750	$	143,750
Term loans		299,250		217,250
Revolving credit facility		—		15,000
Notes Payable - VIP Acquisition		—		27,500
Other Debt		12,284		16,257
Net discount on debt and deferred financing fees ⁽¹⁾		(10,720)		(9,947)
	$	444,564	$	409,810
Less current maturities of long-term debt		(6,158)		(6,219)
Total long-term debt	$	438,406	$	403,591

(1)

– The net discount on debt and deferred financing fees were adjusted retrospectively for the adoption of ASU 2020-06 as discussed further in Note 1.

Future maturities of long-term debt, excluding the discount on debt and deferred financing fees, as of September 30, 2021, are as follows:


($'s in 000's)
Remainder of 2021	$	2,437
2022		6,246
2023		6,524
2024		6,827
2025		3,000
Thereafter		430,250

Leases

9 Months Ended

Sep. 30, 2021

Leases

Leases

Note 6 – Leases

The Company leases certain real estate for commercial, production, and retail purposes, as well as equipment from third parties. Lease expiration dates are between 2021 and 2027. A portion of leases are denominated in foreign currencies.

For both operating and finance leases, the Company recognizes a right-of-use (“ROU”) asset, which represents the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term.

We elected the short-term lease exemption for all leases that qualify. This means leases having an initial term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease.

The Company’s leases may include options to extend or terminate the lease. Renewal options generally range from one to ten years and the options to extend are included in the lease term when it is reasonably certain that we will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment and vehicles primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of the Company’s leases, the Company applies a portfolio approach using an estimated incremental borrowing rate, giving consideration to company specific information and publicly available interest rates for instruments with similar characteristics, to determine the initial present value of lease payments over the lease terms.

The components of lease expense consists of the following:


	For the Three Months Ended				For the Nine Months Ended
$'s in 000's	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Finance lease cost
Amortization of right-of-use assets	$	412	$	409	$	1,781	$	1,191
Interest on lease liabilities		63		11		277		170
Operating lease cost		1,435		1,316		4,059		4,426
Variable lease cost⁽¹⁾		363		530		978		783
Short-term lease cost		4		12		10		31
Sublease income		(65)		(226)		(173)		(679)
Total lease cost	$	2,212	$	2,052	$	6,932	$	5,922

(1)

Variable lease cost primarily relates to percentage rent, common area maintenance, property taxes and insurance on leased real estate.

Other information related to leases was as follows as of:


	September 30, 2021	September 30, 2020
Weighted-average remaining lease term (years)
Operating leases	4.01	4.52
Finance leases	2.50	2.45
Weighted-average discount rate
Operating leases	5.0%	5.3%
Finance leases	4.7%	5.8%

Annual future commitments under non-cancelable leases as of September 30, 2021, consist of the following:


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2021	$	1,679	$	371
2022		6,684		1,487
2023		5,897		1,548
2024		4,341		463
2025		3,391		78
Thereafter		1,983		—
Total minimum future obligations	$	23,975	$	3,947
Less interest		(2,227)		(230)
Present value of net future minimum obligations		21,748		3,717
Less current lease obligations		(5,891)		(1,339)
Long-term lease obligations	$	15,857	$	2,378

Supplemental cash flow information:



	Nine Months Ended		Nine Months Ended
$'s in 000's	September 30, 2021		September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	277	$	170
Operating cash flows from operating leases		3,928		4,334
Financing cash flows from finance leases		1,573		1,252
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		4,828		3,153
Finance leases		141		993

Earnings per Share

9 Months Ended

Sep. 30, 2021

Earnings per Share

Earnings per Share

Note 8 – Earnings per Share

Basic and Diluted Loss per Share

Basic loss per share of Class A common stock is computed by dividing net loss available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net loss available to PetIQ, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

On January 1, 2021, we adopted ASU 2020-06 using the full retrospective method. Following this adoption, we utilize the if-converted method for the diluted net loss per share calculation of our convertible Notes (see Note 1 for more information on the adoption of ASU 2020-06).

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted loss per share of Class A common stock:


	Three months ended September 30,				Nine months ended September 30,
(in 000's, except for per share amounts)		2021	2020			2021	2020
Numerator:
Net loss	$	(8,328)	$	(71,522)	$	(1,908)	$	(75,604)
Less: net loss attributable to non-controlling interests		(426)		(1,272)		(65)		(1,775)
Net loss attributable to PetIQ, Inc. — basic and diluted		(7,902)		(70,250)		(1,843)		(73,829)
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		28,940		24,935		27,949		24,365
Dilutive effects of stock options that are convertible into Class A common stock		—		—		—		—
Dilutive effect of RSUs		—		—		—		—
Dilutive effect for conversion of Notes		—		—		—		—
Weighted-average shares of Class A common stock outstanding — diluted		28,940		24,935		27,949		24,365

Loss per share of Class A common stock — basic	$	(0.27)	$	(2.82)	$	(0.07)	$	(3.03)
Loss per share of Class A common stock — diluted	$	(0.27)	$	(2.82)	$	(0.07)	$	(3.03)

Shares of the Company’s Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.

The computation of dilutive effect of other potential common shares excludes all stock options and restricted stock units for the three and nine months ended September 30, 2021 and 2020, as the inclusion under the treasury stock method would have been antidilutive. The dilutive impact of the Notes have not been included in the dilutive earnings per share calculation for the three and nine months ended September 30, 2021 and 2020 as they would be antidilutive.

Stock Based Compensation

9 Months Ended

Sep. 30, 2021

Stock Based Compensation

Stock Based Compensation

Note 9 – Stock Based Compensation

PetIQ, Inc. Omnibus Incentive Plan

The PetIQ, Inc. Omnibus Incentive Plan, as amended (the “Plan”), provides for the grant of various equity-based incentive awards to directors of the Company, employees, and consultants. The types of equity-based awards that may be granted under the Plan include: stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. The Company has 3,914 thousand authorized shares under the Plan. As of September 30, 2021

and 2020, 713 thousand and 1,280 thousand shares were available for issuance under the Plan, respectively. All awards issued under the Plan may only be settled in shares of Class A common stock. Shares issued pursuant to awards under the incentive plans are from our authorized but unissued shares.

PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees

The PetIQ, Inc. 2018 Inducement and Retention Stock Plan for CVC Employees (the “Inducement Plan”) provides for the grant of stock options to employees hired in connection with the VIP Acquisition as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). The Inducement Plan reserved 800 thousand shares of Class A common stock of the Company. As of September 30, 2021, no shares were available for issuance under the Inducement Plan. All awards issued under the Plan may only be settled in shares of Class A common stock.

Stock Options

The Company awards stock options to certain employees and directors under the Plan and previously issued stock options under the Inducement Plan, which are subject to time-based vesting conditions, typically 25% on each anniversary of the grant date until fully vested. Upon a termination of service relationship by the Company, all unvested options will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The maximum contractual term for stock options is 10 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $1.7 million and $4.5 million for the three and nine months ended September 30, 2021, respectively, and $1.3 million and $4.9 million for the three and nine months ended September 30, 2020, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients. The fair value of the stock option awards was determined on the grant dates using the Black-Scholes valuation model based on the following weighted-average assumptions for the periods ended September 30, 2021 and 2020:


	September 30, 2021			September 30, 2020
Expected term (years) ⁽¹⁾		6.17			6.25
Expected volatility ⁽²⁾		33.45	%		33.91	%
Risk-free interest rate ⁽³⁾		0.89	%		0.37	%
Dividend yield ⁽⁴⁾		0.00	%		0.00	%

(1)

The Company utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

(2)

The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period consistent with the expected option term.

(3)

The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds to the expected term of the stock options.

(4)

The Company has not paid and does not anticipate paying a cash dividend on our common stock.

The weighted average grant date fair value of stock options granted during the period ended September 30, 2021 was $12.39 per option. At September 30, 2021, total unrecognized compensation cost related to unvested stock options was $8.4 million and is expected to be recognized over a weighted-average period of 2.4 years.


							Weighted
							Average
			Weighted		Aggregate		Remaining
	Stock		Average		Intrinsic		Contractual
	Options		Exercise		Value		Life
	(in 000's)		Price		(in 000's)		(years)
Outstanding at January 1, 2020		2,072	$	24.63	$	6,266		8.0
Granted		505		20.22
Exercised		(395)		23.48	$	4,468
Forfeited		(96)		21.42
Outstanding at December 31, 2020		2,086	$	23.93	$	30,302		7.2
Granted		354		35.66
Exercised		(533)		23.69	$	8,059
Forfeited		(37)		23.88
Cancelled		(1)		27.73
Outstanding at September 30, 2021		1,869	$	26.21	$	4,957		7.3
Options exercisable at September 30, 2021		768

Restricted Stock Units

The Company awards RSUs to certain employees and directors under the Plan, which are subject to time-based vesting conditions. Upon a termination of service relationship by the Company, all unvested RSUs will be forfeited and the shares of common stock underlying such awards will become available for issuance under the Plan. The fair value of RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant. At September 30, 2021, total unrecognized compensation cost related to unvested RSUs was $12.6 million and is expected to vest over a weighted average 2.9 years.

The fair value of these equity awards is amortized to equity based compensation expense over the vesting period, which totaled $1.7 million and $3.6 million for the three and nine months ended September 30, 2021, respectively, and $0.5 million and $1.7 million for the three and nine months ended September 30, 2020, respectively. All stock based compensation expense is included in general and administrative expenses based on the role of recipients.

The following table summarizes the activity of the Company’s RSUs for the period ended September 30, 2021.


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2020		133	$	28.85
Granted		271		20.73
Settled		(70)		25.65
Forfeited		(17)		23.34
Outstanding at December 31, 2020		317	$	22.91
Granted		268		37.91
Settled		(98)		24.36
Forfeited		(11)		24.80
Nonvested RSUs at September 30, 2021		476	$	31.01

Segments

9 Months Ended

Sep. 30, 2021

Segments

Segments

Note 14 – Segments

The Company has two operating segments: Products and Services. The Products segment consists of the Company’s manufacturing and distribution business. The Services segment consists of the Company’s veterinary services, and related product sales, provided by the Company directly to consumers.

The segments are based on the discrete financial information reviewed by the Chief Operating Decision Maker (“CODM”) to make resource allocation decisions and to evaluate performance. We measure and evaluate our reportable segments based on net sales and segment Adjusted EBITDA. We exclude from our segments certain corporate costs and expenses, such as accounting, legal, human resources, information technology and corporate headquarters expenses as our corporate functions do not meet the definition of a segment as defined in the accounting guidance related to segment reporting.

Financial information relating to the Company’s operating segments for the three months ended:


$'s in 000's					Unallocated
September 30, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	181,557	$	28,977	$	—	$	210,534
Adjusted EBITDA		33,678		3,821		(21,135)		16,364
Depreciation expense		982		1,454		709		3,145
Capital expenditures		578		2,177		3,520		6,275


$'s in 000's					Unallocated
September 30, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	150,063	$	12,020	$	—	$	162,083
Adjusted EBITDA		26,318		(223)		(14,088)		12,007
Depreciation expense		1,201		937		892		3,030
Capital expenditures		4,072		2,193		122		6,387

Financial information relating to the Company’s operating segments for the nine months ended:


$'s in 000's					Unallocated
September 30, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	654,448	$	81,444	$	—	$	735,892
Adjusted EBITDA		120,657		8,945		(52,018)		77,584
Depreciation expense		2,913		3,924		2,582		9,419
Capital expenditures		1,533		8,810		14,234		24,577


$'s in 000's					Unallocated
September 30, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	580,650	$	35,193	$	—	$	615,843
Adjusted EBITDA		92,448		2,878		(40,555)		54,771
Depreciation expense		3,685		2,674		2,527		8,886
Capital expenditures		9,337		5,966		1,508		16,811

The following table reconciles Segment Adjusted EBITDA to Net loss for the periods presented.


	For the three months ended				For the nine months ended
$'s in 000's	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Adjusted EBITDA:
Product	$	33,678	$	26,318	$	120,657	$	92,448
Services		3,821		(223)		8,945		2,878
Unallocated Corporate		(21,135)		(14,088)		(52,018)		(40,555)
Total Consolidated		16,364		12,007		77,584		54,771
Adjustments:
Depreciation		(3,145)		(3,030)		(9,419)		(8,886)
Amortization		(4,627)		(3,821)		(17,682)		(8,313)
Interest		(6,168)		(6,427)		(18,693)		(16,460)
Acquisition costs⁽¹⁾		—		(1,083)		(92)		(1,815)
Loss on extinguishment and related costs⁽²⁾		—		—		(6,438)		—
Stock based compensation expense		(2,627)		(2,147)		(7,188)		(6,549)
Integration costs⁽³⁾		1,041		(307)		354		(9,611)
Non same-store revenue⁽⁴⁾		7,245		2,884		17,622		6,119
Non same-store costs⁽⁴⁾		(12,594)		(5,378)		(32,426)		(15,476)
Clinic launch expenses⁽⁵⁾		(846)		(767)		(2,126)		(2,046)
Litigation expenses		(2,323)		(290)		(2,886)		(723)
CFO Transition		(331)		—		(331)		—
COVID-19 related costs⁽⁶⁾		—		(1,600)		—		(6,033)
Pretax net loss	$	(8,011)	$	(9,959)	$	(1,721)	$	(15,022)
Income tax expense		(317)		(61,563)		(187)		(60,582)
Net loss	$	(8,328)	$	(71,522)	$	(1,908)	$	(75,604)

(1)

Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket 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)

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. Additionally integration costs include the gain on the sale of our previous headquarters.

(4)

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.

(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.

Supplemental geographic disclosures are below.


		Nine months ended September 30, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	649,232	$	5,216	$	654,448
Service revenue		81,444		—		81,444
Total net sales	$	730,676	$	5,216	$	735,892


		Nine months ended September 30, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	576,756	$	3,894	$	580,650
Service revenue		35,193		—		35,193
Total net sales	$	611,949	$	3,894	$	615,843


		Three months ended September 30, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	179,759	$	1,798	$	181,557
Service revenue		28,977		—		28,977
Total net sales	$	208,736	$	1,798	$	210,534


		Three months ended September 30, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	148,424	$	1,639	$	150,063
Service revenue		12,020		—		12,020
Total net sales	$	160,444	$	1,639	$	162,083

Property, plant, and equipment by geographic location is below.


	September 30, 2021		December 31, 2020
United States	$	73,004	$	61,807
Europe		1,342		1,339
Total	$	74,346	$	63,146

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 280
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Principal Business Activity and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Principal Business Activity and Significant Accounting Policies

Use of Estimates

Use of Estimates

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Cash and Cash Equivalents

Cash and Cash Equivalents

Receivables and Credit Policy

Receivables and Credit Policy

Other receivables consists of various receivables due from vendors, banking partners, and other receivable from business partners.

Accounts receivable, net consists of the following as of:


$'s in 000's	September 30, 2021		December 31, 2020
Trade receivables	$	116,187	$	96,381
Other receivables		8,416		7,094
		124,603		103,475
Less: Allowance for doubtful accounts		(333)		(720)
Total accounts receivable, net	$	124,270	$	102,755

Inventories

Inventories


$'s in 000's	September 30, 2021		December 31, 2020
Raw materials	$	21,830	$	15,761
Work in progress		1,854		2,273
Finished goods		84,460		79,739
Total inventories	$	108,144	$	97,773

Property, Plant, and Equipment

Property, Plant, and Equipment


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			2-15 years
Furniture and fixtures			5-10 years

Convertible debt

Convertible Debt

Revenue Recognition

Revenue Recognition

When Performance Obligations Are Satisfied

Variable Consideration

Significant Payment Terms

Shipping

Warranties & Returns

Contract balances

Contract asset and liability balances as of September 30, 2021 and 2020 are immaterial. The Company does not have significant deferred revenue or unbilled receivable balances.

Cost of Services

Cost of Services

Research and Development and Advertising Costs

Research and Development and Advertising Costs

Collaboration Agreements

Collaboration Agreements

Accounting for Income taxes

Accounting for Income Taxes

Non-controlling interest

Non-controlling interest

Litigation

Litigation

Adopted Accounting Standard Updates

Adopted Accounting Standard Updates


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Three Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(7,829)	$	1,402	$	(6,427)
	Tax expense		(53,168)		(8,395)		(61,563)

Net loss			(64,529)		(6,993)		(71,522)


			For the Nine Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(18,500)	$	2,040	$	(16,460)
	Tax expense		(52,060)		(8,522)		(60,582)

Net loss			(69,122)		(6,482)		(75,604)

Principal Business Activity and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of accounts receivable


$'s in 000's	September 30, 2021		December 31, 2020
Trade receivables	$	116,187	$	96,381
Other receivables		8,416		7,094
		124,603		103,475
Less: Allowance for doubtful accounts		(333)		(720)
Total accounts receivable, net	$	124,270	$	102,755

Schedule of components of inventories


$'s in 000's	September 30, 2021		December 31, 2020
Raw materials	$	21,830	$	15,761
Work in progress		1,854		2,273
Finished goods		84,460		79,739
Total inventories	$	108,144	$	97,773

Schedule of estimated useful lives of property, plant, and equipment


Computer equipment and software			3 years
Vehicle and vehicle accessories			3-5 years
Buildings			33 years
Equipment			2-15 years
Leasehold improvements			2-15 years
Furniture and fixtures			5-10 years

ASU 2020-06

Schedule of impact of the adoption


			December 31, 2020		ASU 2020-06		December 31, 2020
			As reported		Adjustment		As adjusted
Liabilities
	Long-term debt, less current installments	$	355,979	$	47,612	$	403,591
Stockholders' Equity
	Additional Paid-in Capital		356,442		(36,800)		319,642
	Non-controlling Interest		31,614		(5,631)		25,983
	Accumulated Deficit		(93,377)		(5,181)		(98,558)


			For the Three Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(7,829)	$	1,402	$	(6,427)
	Tax expense		(53,168)		(8,395)		(61,563)

Net loss			(64,529)		(6,993)		(71,522)


			For the Nine Months Ended
			September 30, 2020		ASU 2020-06		September 30, 2020
			As reported		Adjustment		As adjusted

	Interest expense, net	$	(18,500)	$	2,040	$	(16,460)
	Tax expense		(52,060)		(8,522)		(60,582)

Net loss			(69,122)		(6,482)		(75,604)

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
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-Paragraph 1
-Subparagraph (g)(2)
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-URI http://asc.fasb.org/topic&trid=2122394

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2021

Intangible Assets and Goodwill

Schedule of intangible assets


$'s in 000's	Useful Lives	September 30, 2021		December 31, 2020
Amortizable intangibles
Certification	7 years	$	350	$	350
Customer relationships	12-20 years		160,160		160,178
Patents and processes	5-10 years		14,879		14,905
Brand names	5-15 years		24,727		24,740
Total amortizable intangibles			200,116		200,173
Less accumulated amortization			(39,815)		(25,984)
Total net amortizable intangibles			160,301		174,189
Non-amortizable intangibles
Trademarks and other			33,341		33,341
In-process research and development			1,668		5,470
Intangible assets, net of accumulated amortization		$	195,310	$	213,000

Estimated future amortization expense


Years ending December 31, ($'s in 000's)
Remainder of 2021	$	4,627
2022		17,965
2023		16,919
2024		14,553
2025		13,893
Thereafter		92,344

Schedule of Goodwill


	Reporting Unit
($'s in 000's)	Products		Services		Total
Goodwill as of January 1, 2020		183,781		47,264		231,045
Foreign currency translation		113		—		113
Goodwill as of December 31, 2020		183,894		47,264		231,158
Foreign currency translation		(75)		—		(75)
Goodwill as of September 30, 2021	$	183,819	$	47,264	$	231,083

Leases (Tables)

9 Months Ended

Sep. 30, 2021

Leases

Schedule of components of lease expense


	For the Three Months Ended				For the Nine Months Ended
$'s in 000's	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Finance lease cost
Amortization of right-of-use assets	$	412	$	409	$	1,781	$	1,191
Interest on lease liabilities		63		11		277		170
Operating lease cost		1,435		1,316		4,059		4,426
Variable lease cost⁽¹⁾		363		530		978		783
Short-term lease cost		4		12		10		31
Sublease income		(65)		(226)		(173)		(679)
Total lease cost	$	2,212	$	2,052	$	6,932	$	5,922

(1)

Variable lease cost primarily relates to percentage rent, common area maintenance, property taxes and insurance on leased real estate.

Schedule of other information related to leases


	September 30, 2021	September 30, 2020
Weighted-average remaining lease term (years)
Operating leases	4.01	4.52
Finance leases	2.50	2.45
Weighted-average discount rate
Operating leases	5.0%	5.3%
Finance leases	4.7%	5.8%

Summary of annual future commitments under non-cancelable leases


	Lease Obligations
$'s in 000's	Operating Leases		Finance Leases
Remainder of 2021	$	1,679	$	371
2022		6,684		1,487
2023		5,897		1,548
2024		4,341		463
2025		3,391		78
Thereafter		1,983		—
Total minimum future obligations	$	23,975	$	3,947
Less interest		(2,227)		(230)
Present value of net future minimum obligations		21,748		3,717
Less current lease obligations		(5,891)		(1,339)
Long-term lease obligations	$	15,857	$	2,378

Supplemental cash flow information



	Nine Months Ended		Nine Months Ended
$'s in 000's	September 30, 2021		September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	277	$	170
Operating cash flows from operating leases		3,928		4,334
Financing cash flows from finance leases		1,573		1,252
(Noncash) right-of-use assets obtained in exchange for lease obligations
Operating leases		4,828		3,153
Finance leases		141		993

Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings per Share

Reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock


	Three months ended September 30,				Nine months ended September 30,
(in 000's, except for per share amounts)		2021	2020			2021	2020
Numerator:
Net loss	$	(8,328)	$	(71,522)	$	(1,908)	$	(75,604)
Less: net loss attributable to non-controlling interests		(426)		(1,272)		(65)		(1,775)
Net loss attributable to PetIQ, Inc. — basic and diluted		(7,902)		(70,250)		(1,843)		(73,829)
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		28,940		24,935		27,949		24,365
Dilutive effects of stock options that are convertible into Class A common stock		—		—		—		—
Dilutive effect of RSUs		—		—		—		—
Dilutive effect for conversion of Notes		—		—		—		—
Weighted-average shares of Class A common stock outstanding — diluted		28,940		24,935		27,949		24,365

Loss per share of Class A common stock — basic	$	(0.27)	$	(2.82)	$	(0.07)	$	(3.03)
Loss per share of Class A common stock — diluted	$	(0.27)	$	(2.82)	$	(0.07)	$	(3.03)

Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2021

Stock Based Compensation

Fair value of the stock option awards was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions


	September 30, 2021			September 30, 2020
Expected term (years) ⁽¹⁾		6.17			6.25
Expected volatility ⁽²⁾		33.45	%		33.91	%
Risk-free interest rate ⁽³⁾		0.89	%		0.37	%
Dividend yield ⁽⁴⁾		0.00	%		0.00	%

(1)

(2)

The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period consistent with the expected option term.

(3)

The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds to the expected term of the stock options.

(4)

The Company has not paid and does not anticipate paying a cash dividend on our common stock.

Summary of the activity of the Company's unvested stock options


							Weighted
							Average
			Weighted		Aggregate		Remaining
	Stock		Average		Intrinsic		Contractual
	Options		Exercise		Value		Life
	(in 000's)		Price		(in 000's)		(years)
Outstanding at January 1, 2020		2,072	$	24.63	$	6,266		8.0
Granted		505		20.22
Exercised		(395)		23.48	$	4,468
Forfeited		(96)		21.42
Outstanding at December 31, 2020		2,086	$	23.93	$	30,302		7.2
Granted		354		35.66
Exercised		(533)		23.69	$	8,059
Forfeited		(37)		23.88
Cancelled		(1)		27.73
Outstanding at September 30, 2021		1,869	$	26.21	$	4,957		7.3
Options exercisable at September 30, 2021		768

Summary of RSU activity


			Weighted
	Number of		Average
	Shares		Grant Date
	(in 000's)		Fair Value
Outstanding at January 1, 2020		133	$	28.85
Granted		271		20.73
Settled		(70)		25.65
Forfeited		(17)		23.34
Outstanding at December 31, 2020		317	$	22.91
Granted		268		37.91
Settled		(98)		24.36
Forfeited		(11)		24.80
Nonvested RSUs at September 30, 2021		476	$	31.01

Segments (Tables)

9 Months Ended

Sep. 30, 2021

Segments

Summary of financial information relating to the Company's operating segments

Financial information relating to the Company’s operating segments for the three months ended:


$'s in 000's					Unallocated
September 30, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	181,557	$	28,977	$	—	$	210,534
Adjusted EBITDA		33,678		3,821		(21,135)		16,364
Depreciation expense		982		1,454		709		3,145
Capital expenditures		578		2,177		3,520		6,275


$'s in 000's					Unallocated
September 30, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	150,063	$	12,020	$	—	$	162,083
Adjusted EBITDA		26,318		(223)		(14,088)		12,007
Depreciation expense		1,201		937		892		3,030
Capital expenditures		4,072		2,193		122		6,387

Financial information relating to the Company’s operating segments for the nine months ended:


$'s in 000's					Unallocated
September 30, 2021	Products		Services		Corporate		Consolidated
Net Sales	$	654,448	$	81,444	$	—	$	735,892
Adjusted EBITDA		120,657		8,945		(52,018)		77,584
Depreciation expense		2,913		3,924		2,582		9,419
Capital expenditures		1,533		8,810		14,234		24,577


$'s in 000's					Unallocated
September 30, 2020	Products		Services		Corporate		Consolidated
Net Sales	$	580,650	$	35,193	$	—	$	615,843
Adjusted EBITDA		92,448		2,878		(40,555)		54,771
Depreciation expense		3,685		2,674		2,527		8,886
Capital expenditures		9,337		5,966		1,508		16,811

Summary of reconciles segment adjusted ebitda to pretax net income


	For the three months ended				For the nine months ended
$'s in 000's	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Adjusted EBITDA:
Product	$	33,678	$	26,318	$	120,657	$	92,448
Services		3,821		(223)		8,945		2,878
Unallocated Corporate		(21,135)		(14,088)		(52,018)		(40,555)
Total Consolidated		16,364		12,007		77,584		54,771
Adjustments:
Depreciation		(3,145)		(3,030)		(9,419)		(8,886)
Amortization		(4,627)		(3,821)		(17,682)		(8,313)
Interest		(6,168)		(6,427)		(18,693)		(16,460)
Acquisition costs⁽¹⁾		—		(1,083)		(92)		(1,815)
Loss on extinguishment and related costs⁽²⁾		—		—		(6,438)		—
Stock based compensation expense		(2,627)		(2,147)		(7,188)		(6,549)
Integration costs⁽³⁾		1,041		(307)		354		(9,611)
Non same-store revenue⁽⁴⁾		7,245		2,884		17,622		6,119
Non same-store costs⁽⁴⁾		(12,594)		(5,378)		(32,426)		(15,476)
Clinic launch expenses⁽⁵⁾		(846)		(767)		(2,126)		(2,046)
Litigation expenses		(2,323)		(290)		(2,886)		(723)
CFO Transition		(331)		—		(331)		—
COVID-19 related costs⁽⁶⁾		—		(1,600)		—		(6,033)
Pretax net loss	$	(8,011)	$	(9,959)	$	(1,721)	$	(15,022)
Income tax expense		(317)		(61,563)		(187)		(60,582)
Net loss	$	(8,328)	$	(71,522)	$	(1,908)	$	(75,604)

(1)

Acquisition costs include legal, accounting, banking, consulting, diligence, and other out-of-pocket 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)

costs, legal and consulting expenses, and IT costs. Additionally integration costs include the gain on the sale of our previous headquarters.

(4)

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.

(5)

(6)

Summary of net book value of property plant and equipment, net by location


		Nine months ended September 30, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	649,232	$	5,216	$	654,448
Service revenue		81,444		—		81,444
Total net sales	$	730,676	$	5,216	$	735,892


		Nine months ended September 30, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	576,756	$	3,894	$	580,650
Service revenue		35,193		—		35,193
Total net sales	$	611,949	$	3,894	$	615,843


		Three months ended September 30, 2021
$'s in 000's		U.S.		Foreign		Total
Product sales	$	179,759	$	1,798	$	181,557
Service revenue		28,977		—		28,977
Total net sales	$	208,736	$	1,798	$	210,534


		Three months ended September 30, 2020
$'s in 000's		U.S.		Foreign		Total
Product sales	$	148,424	$	1,639	$	150,063
Service revenue		12,020		—		12,020
Total net sales	$	160,444	$	1,639	$	162,083

Property, plant, and equipment by geographic location is below.


	September 30, 2021		December 31, 2020
United States	$	73,004	$	61,807
Europe		1,342		1,339
Total	$	74,346	$	63,146

Principal Business Activity and Significant Accounting Policies - Adopted Accounting Standard Updates (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Liabilities
Long-term debt, less current installments	$ 438,406		$ 438,406		$ 403,591
Stockholder's Equity
Additional Paid in Capital	361,836		361,836		319,642
Non-controlling Interest	2,552		2,552		25,983
Accumulated deficit	(100,401)		(100,401)		(98,558)
Condensed Consolidated Statements of Operations
Interest expense, net	(6,168)	$ (6,427)	(18,693)	$ (16,460)
Income tax expense	(317)	(61,563)	(187)	(60,582)
Net loss	$ (8,328)	(71,522)	$ (1,908)	(75,604)
As reported \| ASU 2020-06
Liabilities
Long-term debt, less current installments					355,979
Stockholder's Equity
Additional Paid in Capital					356,442
Non-controlling Interest					31,614
Accumulated deficit					(93,377)
Condensed Consolidated Statements of Operations
Interest expense, net		(7,829)		(18,500)
Income tax expense		(53,168)		(52,060)
Net loss		(64,529)		(69,122)
Adjustment \| ASU 2020-06
Liabilities
Long-term debt, less current installments					47,612
Stockholder's Equity
Additional Paid in Capital					(36,800)
Non-controlling Interest					(5,631)
Accumulated deficit					$ (5,181)
Condensed Consolidated Statements of Operations
Interest expense, net		1,402		2,040
Income tax expense		(8,395)		(8,522)
Net loss		$ (6,993)		$ (6,482)

Debt - A&R (Details) - USD ($) $ in Thousands			1 Months Ended		9 Months Ended		12 Months Ended
Debt - A&R (Details) - USD ($) $ in Thousands	May 14, 2020	Jul. 08, 2019	Jul. 31, 2020	Jul. 31, 2017	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2019	Jul. 31, 2021	Dec. 31, 2020
Debt
Fixed interest rate				4.35%
Earn-outs payments based on achievement of company Adjusted EBITDA targets							$ 7,500
Earn-outs payments based on achievement of company Adjusted EBITDA targets for 2019							$ 10,000
Amortization schedule				25 years
Amount required to pay pursuant to settlement agreement			$ 20,600
Payment on signing			2,600
Payment per quarter			$ 1,000
Market interest rate			8.30%
Estimated fair value of the payment obligation			$ 17,500
Balloon payment				10 years
Other Debt					$ 12,284				$ 16,257
Net discount on debt and deferred financing fees					(10,720)				(9,947)
Long-term Debt, Total					444,564				409,810
Less current maturities of long-term debt					(6,158)				(6,219)
Long-term debt, less current installments					438,406				403,591
Future maturities of long-term debt
Remainder of 2021					2,437
2022					6,246
2023					6,524
2024					6,827
2025					3,000
Thereafter					430,250
Debt issuance costs					6,454	$ 550
Convertible Notes [Member]
Debt
Outstanding balance					143,750				143,750
Revolving credit facility
Debt
Maximum borrowing capacity		$ 125,000
Outstanding balance									15,000
Revolving credit facility \| Minimum
Debt
Unused facility fee (as a percent)		0.375%
Revolving credit facility \| Maximum
Debt
Unused facility fee (as a percent)		0.50%
Term loans
Debt
Outstanding balance					$ 299,250				217,250
A&R Term Loan Credit Agreement
Debt
Maximum borrowing capacity		$ 220,000
A&R Term Loan Credit Agreement \| Euro dollar
Debt
Unused facility fee (as a percent)	1.00%
Variable interest rate, basis points spread over variable reference rate (as a percent)		5.00%
Earned Contingent Note
Debt
Fixed interest rate					6.75%
Contingent notes					$ 27,500
Long-term Debt, Total									$ 27,500
Guaranteed note
Debt
Long-term Debt, Total								$ 10,000

Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Lease Obligations, Operating Leases
Remainder of 2021	$ 1,679
2022	6,684
2023	5,897
2024	4,341
2025	3,391
Thereafter	1,983
Total minimum future obligations	23,975
Less interest	(2,227)
Present value of net future minimum obligations	21,748
Less current lease obligations	(5,891)	$ (4,915)
Long-term lease obligations	15,857	15,789
Lease Obligations, Finance Leases
Remainder of 2021	371
2022	1,487
2023	1,548
2024	463
2025	78
Total minimum future obligations	3,947
Less interest	(230)
Present value of net future minimum obligations	3,717
Less current lease obligations	(1,339)
Long-term lease obligations	$ 2,378	$ 3,338

Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Numerator:
Net loss	$ (8,328)	$ (71,522)	$ (1,908)	$ (75,604)
Less: net (loss) income attributable to non-controlling interests	(426)	(1,272)	(65)	(1,775)
Net loss attributable to PetIQ, Inc. - basic and diluted	$ (7,902)	$ (70,250)	$ (1,843)	$ (73,829)
Denominator:
Weighted-average shares of Class A common stock outstanding -- basic	28,940	24,935	27,949	24,365
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	28,940	24,935	27,949	24,365
Loss per share of Class A common stock - basic	$ (0.27)	$ (2.82)	$ (0.07)	$ (3.03)
Loss per share of Class A common stock - diluted	$ (0.27)	$ (2.82)	$ (0.07)	$ (3.03)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

+ Details

Stock Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Unrecognized compensation cost related to unvested stock options	$ 8,400		$ 8,400
Share-based Compensation	2,627	$ 2,147	7,188	$ 6,549
Income Tax Expense	317	61,563	187	60,582
RSU
Unrecognized compensation cost related to unvested stock options	12,600		$ 12,600
Vesting period			2 years 10 months 24 days
Share-based Compensation	$ 1,700	$ 500	$ 3,600	$ 1,700
Number of Shares
Beginning Balance			317	133	133
Granted (in shares)			268		271
Settled (in shares)			(98)		(70)
Forfeited (in shares)			(11)		(17)
Ending balance	476		476		317
Weighted Average Grant Date Fair Value
Beginning Balance			$ 22.91	$ 28.85	$ 28.85
Granted (per share)			37.91		20.73
Settled (per share)			24.36		25.65
Forfeited (per share)			24.80		23.34
Ending balance	$ 31.01		$ 31.01		$ 22.91

Segments (Details) $ in Thousands		3 Months Ended		9 Months Ended
Segments (Details) $ in Thousands	Jan. 17, 2018 segment	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Segments
Number of operating segments \| segment	2
Number of reportable segments \| segment				2
Financial information relating to the Company's operating segments
Net Sales		$ 210,534	$ 162,083	$ 735,892	$ 615,843
Adjusted EBITDA		16,364	12,007	77,584	54,771
Property, plant and equipment, net		74,346		74,346		$ 63,146
Depreciation expense		3,145	3,030	9,419	8,886
Capital expenditures		6,275	6,387	24,577	16,811
United States
Financial information relating to the Company's operating segments
Net Sales		208,736	160,444	730,676	611,949
Property, plant and equipment, net		73,004		73,004		61,807
Foreign
Financial information relating to the Company's operating segments
Net Sales		1,798	1,639	5,216	3,894
Europe
Financial information relating to the Company's operating segments
Property, plant and equipment, net		1,342		1,342		$ 1,339
Products
Financial information relating to the Company's operating segments
Net Sales		181,557	150,063	654,448	580,650
Products \| United States
Financial information relating to the Company's operating segments
Net Sales		179,759	148,424	649,232	576,756
Products \| Foreign
Financial information relating to the Company's operating segments
Net Sales		1,798	1,639	5,216	3,894
Services
Financial information relating to the Company's operating segments
Net Sales		28,977	12,020	81,444	35,193
Services \| United States
Financial information relating to the Company's operating segments
Net Sales		28,977	12,020	81,444	35,193
Operating Segments \| Products
Financial information relating to the Company's operating segments
Net Sales		181,557	150,063	654,448	580,650
Adjusted EBITDA		33,678	26,318	120,657	92,448
Depreciation expense		982	1,201	2,913	3,685
Capital expenditures		578	4,072	1,533	9,337
Operating Segments \| Services
Financial information relating to the Company's operating segments
Net Sales		28,977	12,020	81,444	35,193
Adjusted EBITDA		3,821	(223)	8,945	2,878
Depreciation expense		1,454	937	3,924	2,674
Capital expenditures		2,177	2,193	8,810	5,966
Corporate, Non-Segment \| Unallocated Corporate
Financial information relating to the Company's operating segments
Adjusted EBITDA		(21,135)	(14,088)	(52,018)	(40,555)
Depreciation expense		709	892	2,582	2,527
Capital expenditures		$ 3,520	$ 122	$ 14,234	$ 1,508

Segments - Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ 16,364	$ 12,007	$ 77,584	$ 54,771
Depreciation	(3,145)	(3,030)	(9,419)	(8,886)
Amortization	(4,627)	(3,821)	(17,682)	(8,313)
Interest	(6,168)	(6,427)	(18,693)	(16,460)
Acquisition costs		(1,083)	(92)	(1,815)
Stock based compensation expense	(2,627)	(2,147)	(7,188)	(6,549)
Non same-store revenue	7,245	2,884	17,622	6,119
Non same-store costs	(12,594)	(5,378)	(32,426)	(15,476)
Integration costs and costs of discontinued clinics	1,041	(307)	354	(9,611)
Clinic launch expenses	(846)	(767)	(2,126)	(2,046)
Loss on extinguishment and related costs			(6,438)
Litigation expenses	(2,323)	(290)	(2,886)	(723)
CFO Transition	(331)		(331)
COVID-19 related costs		(1,600)		(6,033)
Pretax net loss	(8,011)	(9,959)	(1,721)	(15,022)
Income tax expense	(317)	(61,563)	(187)	(60,582)
Net loss	(8,328)	(71,522)	(1,908)	(75,604)
Products \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	33,678	26,318	120,657	92,448
Services \| Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	3,821	(223)	8,945	2,878
Unallocated Corporate \| Corporate, Non-Segment
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Adjusted EBITDA	$ (21,135)	$ (14,088)	$ (52,018)	$ (40,555)

Principal Business Activity and Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2021 segment item location state
Principal Business Activity and Significant Accounting Policies
Number of points of distribution \| item	60,000
Number of retail pharmacy locations \| location	2,900
Number of states in which the entity provides veterinary services to pet owners \| state	41
Number of reportable segments \| segment	2

Principal Business Activity and Significant Accounting Policies - Convertible Debt (Details) $ in Millions	May 19, 2020 USD ($)
Convertible Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 143.8

Principal Business Activity and Significant Accounting Policies - Disaggregation of revenue (Details)	Sep. 30, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-09-30
Disaggregation of revenue
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year

Principal Business Activity and Significant Accounting Policies - Collaboration Agreements (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2021 USD ($) product
Collaboration Agreements
Number of product opted out \| product		2
Collaboration agreements, contingent payments to be made	$ 5.8	$ 5.8
Collaboration Agreement, Probable Milestone Payments	$ 2.0	$ 2.0

Principal Business Activity and Significant Accounting Policies - Non-controlling interest (Details)	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2019
Continuing LLC Owners
Noncontrolling Interest [Line Items]
Interest held by non-controlling owners	1.00%	10.60%	16.80%

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2019
Common stock, shares outstanding	29,065	25,711	23,554
Class A common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	125,000	125,000
Common Stock, Shares, Issued	29,065	25,711
Common stock, shares outstanding	29,065	25,711
Class B common stock
Common stock, par value	$ 0.001	$ 0.001
Common stock authorized	100,000	100,000
Common Stock, Shares, Issued	292	3,040
Common stock, shares outstanding	292	3,040

Principal Business Activity and Significant Accounting Policies - Receivables and Credit Policy (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Receivables and Credit Policy
Accounts receivable, gross	$ 124,603	$ 103,475
Less: Allowance for doubtful accounts	(333)	(720)
Total accounts receivable, net	124,270	102,755
Trade receivables
Receivables and Credit Policy
Accounts receivable, gross	116,187	96,381
Other receivables
Receivables and Credit Policy
Accounts receivable, gross	$ 8,416	$ 7,094

Principal Business Activity and Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Inventories
Raw materials	$ 21,830	$ 15,761
Work in progress	1,854	2,273
Finished goods	84,460	79,739
Total inventories	$ 108,144	$ 97,773

Asset Acquisitions - Capstar Acquisition (Details) $ in Thousands		9 Months Ended
	Jul. 31, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)
Business Acquisition [Line Items]
Acquisition Price		$ 24,577	$ 16,811
Capitalized asset acquisition cost		$ 1,100
Fair value measurement input		15
Amortizable Intangibles		$ 80,796
Total purchased intangible assets		$ 96,072
Weighted average amortization period		11 years 9 months 18 days
Trademarks and other
Business Acquisition [Line Items]
Non-Amortizable Intangibles		$ 15,276
Customer relationships
Business Acquisition [Line Items]
Amortizable Intangibles		70,901
Patents and processes
Business Acquisition [Line Items]
Amortizable Intangibles		$ 9,895
Capstar Acquisition
Business Acquisition [Line Items]
Acquisition Price	$ 95,000

Property, Plant, and Equipment (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Aug. 02, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Property, Plant, and Equipment
Property, plant and equipment, gross		$ 111,399		$ 111,399		$ 94,254
Less accumulated depreciation		(37,053)		(37,053)		(31,108)
Total property, plant, and equipment		74,346		74,346		63,146
Depreciation and amortization expense		3,145	$ 3,030	9,419	$ 8,886
Proceeds from Sale of Property, Plant, and Equipment	$ 4,500			5,055	429
Gain (Loss) on Disposition of Property Plant Equipment		1,300		1,185	$ 363
Leasehold improvements
Property, Plant, and Equipment
Property, plant and equipment, gross		24,903		24,903		19,709
Equipment
Property, Plant, and Equipment
Property, plant and equipment, gross		26,043		26,043		25,664
Vehicles and accessories
Property, Plant, and Equipment
Property, plant and equipment, gross		7,097		7,097		7,110
Computer equipment and software
Property, Plant, and Equipment
Property, plant and equipment, gross		12,311		12,311		10,858
Buildings
Property, Plant, and Equipment
Property, plant and equipment, gross		23,328		23,328		10,168
Furniture and fixtures
Property, Plant, and Equipment
Property, plant and equipment, gross		3,785		3,785		2,347
Land
Property, Plant, and Equipment
Property, plant and equipment, gross		6,407		6,407		7,067
Construction in Progress
Property, Plant, and Equipment
Property, plant and equipment, gross		$ 7,525		$ 7,525		$ 11,331

Intangible Assets and Goodwill - Intangible Assets (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) project	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 200,116		$ 200,116		$ 200,173
Less accumulated amortization	(39,815)		(39,815)		(25,984)
Total net amortizable intangibles	160,301		160,301		174,189
Intangible assets, net of accumulated amortization	195,310		195,310		213,000
Amortization expense	4,600	$ 3,800	$ 17,700	$ 8,300
Number of acquired R&D projects \| project			2
General and Administrative Expense	45,252	$ 35,562	$ 129,066	$ 105,744
Trademarks and other
Intangible Assets and Goodwill
Non-amortizable intangibles	33,341		33,341		33,341
IPRD
Intangible Assets and Goodwill
Non-amortizable intangibles	1,668		$ 1,668		5,470
Number of acquired R&D projects \| project			3
General and Administrative Expense			$ 3,800
Certification
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			7 years
Amortizable Intangibles, gross	350		$ 350		350
Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, gross	160,160		$ 160,160		160,178
Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			10 years
Amortizable Intangibles, gross	14,879		$ 14,879		14,905
Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, gross	$ 24,727		$ 24,727		$ 24,740
Minimum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			12 years
Minimum \| Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			5 years
Minimum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			5 years
Maximum \| Customer relationships
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			20 years
Maximum \| Patents and processes
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			10 years
Maximum \| Brand names
Intangible Assets and Goodwill
Amortizable Intangibles, useful lives			15 years

Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Intangible Assets and Goodwill
Remainder of 2021	$ 4,627
2022	17,965
2023	16,919
2024	14,553
2025	13,893
Thereafter	$ 92,344

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Goodwill, Beginning Balance	$ 231,158	$ 231,045
Foreign currency translation	(75)	113
Goodwill, Ending Balance	231,083	231,158
Product
Goodwill, Beginning Balance	183,894	183,781
Foreign currency translation	(75)	113
Goodwill, Ending Balance	183,819	183,894
Services
Goodwill, Beginning Balance	47,264	47,264
Foreign currency translation
Goodwill, Ending Balance	$ 47,264	$ 47,264

Debt - Narative (Details) - USD ($) $ in Millions			9 Months Ended
Debt - Narative (Details) - USD ($) $ in Millions	May 13, 2021	Apr. 13, 2021	Sep. 30, 2021
Debt Instrument [Line Items]
Wrote off deferred financing fees to loss on debt extinguishment		$ 5.5
Transaction cost on termination of debt instrument		$ 0.9
Debt instrument, frequency of periodic payment		quarterly
Term loan B
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 300.0
Asset-based revolving line of credit
Debt Instrument [Line Items]
Maximum borrowing capacity		125.0
VIP seller notes
Debt Instrument [Line Items]
Repayment of debt		27.5
Senior Secured Asset-Based Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 125.0
Line of credit facility contingent increase, additional borrowing capacity	$ 50.0
Eligible investment - grade accounts	90.00%
Percentage of eligible investment other accounts	85.00%
Percentage of net orderly liquidation value of cost of certain eligible on hand and in transit inventory	85.00%
Percentage of qualified cash	100.00%
Line of credit facility, interest rate at period end			2.37%
Unused facility fee (as a percent)			0.35%
Senior Secured Term Loan Facility
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 300.0
Line of credit facility, interest rate at period end		4.75%
Floor rate		0.50%
Percentage of periodic payment, principal		0.25%
Senior Secured Term Loan Facility \| LIBOR \| Minimum
Debt Instrument [Line Items]
Variable interest rate, basis points spread over variable reference rate (as a percent)		3.25%
Senior Secured Term Loan Facility \| LIBOR \| Maximum
Debt Instrument [Line Items]
Variable interest rate, basis points spread over variable reference rate (as a percent)		4.25%

Debt - Convertible Notes (Details) $ / shares in Units, $ in Thousands	May 19, 2020 USD ($) D	Sep. 30, 2021 USD ($) $ / shares	Dec. 31, 2020 $ / shares	Jul. 31, 2017
Debt Instrument [Line Items]
Interest rate				4.35%
Convertible Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 143,800
Interest rate	4.00%
Class A common stock
Debt Instrument [Line Items]
Common stock par value (in dollars per share) \| $ / shares		$ 0.001	$ 0.001
Class A common stock \| Convertible Notes \| Maximum
Debt Instrument [Line Items]
Aggregate principal amount	$ 143,800
Net proceeds from the debt	$ 137,900
Interest rate	4.00%
Conversion ratio	33.7268
Denomination for conversion of debt	$ 1,000
Premium percentage on conversion price	130.00%
Threshold trading days \| D	20
Threshold consecutive trading days \| D	30
Fair value of our convertible notes		$ 171,800

Leases - Narrative (Details)	Sep. 30, 2021
Maximum
Lessee, Lease, Description [Line Items]
Renewal options term	10 years
Minimum
Lessee, Lease, Description [Line Items]
Renewal options term	1 year

Income Tax (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Income Tax (Details) - USD ($) $ in Millions	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019
Income tax expense (benefit)	(4.00%)	(618.20%)	(10.80%)	(403.30%)
Income tax expense (benefit) at federal statutory rate	21.00%	21.00%	21.00%	21.00%
Deferred Tax Assets, Valuation Allowance	$ 90.6		$ 90.6		$ 71.2
Continuing LLC Owners
Interest held by non-controlling owners	1.00%		1.00%		10.60%	16.80%
PetIQ
Interest held by parent	99.00%		99.00%		89.40%	83.20%

Customer Concentration (Details) - customer	3 Months Ended		9 Months Ended		12 Months Ended
Customer Concentration (Details) - customer	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Customer concentrations \| Sales
Customer Concentration
Number of customers accounted for more than 10% of sales individually	2	2	1	2
Customer concentrations \| Sales \| One Customer
Customer Concentration
Concentration risk			26.00%
Customer concentrations \| Sales \| Two Customers
Customer Concentration
Concentration risk	41.00%
Customer concentrations \| Sales \| Three Customers
Customer Concentration
Concentration risk		42.00%		42.00%
Customer concentrations \| Accounts receivable
Customer Concentration
Number of customers accounted for more than 10% of sales individually			2		1
Credit concentrations \| Accounts receivable \| One Customer
Customer Concentration
Concentration risk			56.00%		52.00%

Commitments and Contingencies (Details) - USD ($) $ in Millions	1 Months Ended	9 Months Ended
	Jul. 31, 2020	Sep. 30, 2021
Litigation Contingencies
Loss Contingency, Damages Sought, Value	$ 20.6
Mediation With Third Party
Litigation Contingencies
Liability recorded		$ 1.4
Lawsuit By Former Supplier For Redemption Of Ownership Interest
Litigation Contingencies
Liability recorded		0.8
Loss Contingency, Damages Sought, Value		3.0
Lawsuit By Former Supplier For Redemption Of Ownership Interest \| Minimum
Litigation Contingencies
Loss Contingency, Estimate of Possible Loss		$ 0.8

Related Parties (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
Related Parties (Details) - USD ($)	Apr. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Insurance Policies With Chris Christensen
Related Parties
Premium expense				$ 6,800,000		$ 6,200,000
Insurance Policies With Chris Christensen \| Colliers International
Related Parties
Commission paid				100,000
Payments to acquire land	$ 2,500,000
Payment of Broker's Commission			$ 0		$ 80,000.00
Insurance Policies With Chris Christensen \| Colliers International \| Corporate Office in Eagle Idaho
Related Parties
Real Estate Held-for-sale		$ 4,800,000		4,800,000
Acadia Investor Relations L LC
Related Parties
Related party transaction, expenses from transactions with Related Party		$ 60,000.00		$ 200,000