Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 09, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
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, $0.001 par value | |
Trading Symbol | PETQ | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001668673 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Class A common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 28,973,468 | |
Class B common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 252,540 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 56,718 | $ 79,406 |
Accounts receivable, net | 125,024 | 113,947 |
Inventories | 147,049 | 96,440 |
Other current assets | 7,392 | 8,896 |
Total current assets | 336,183 | 298,689 |
Property, plant and equipment, net | 74,823 | 76,613 |
Operating lease right of use assets | 19,394 | 20,489 |
Other non-current assets | 1,429 | 2,024 |
Intangible assets, net | 176,936 | 190,662 |
Goodwill | 182,949 | 231,110 |
Total assets | 791,714 | 819,587 |
Current liabilities | ||
Accounts payable | 73,399 | 55,057 |
Accrued wages payable | 13,795 | 12,704 |
Accrued interest payable | 2,947 | 3,811 |
Other accrued expenses | 11,009 | 11,680 |
Current portion of operating leases | 6,266 | 6,500 |
Current portion of long-term debt and finance leases | 8,491 | 8,350 |
Total current liabilities | 115,907 | 98,102 |
Operating leases, less current installments | 14,005 | 14,843 |
Long-term debt, less current installments | 444,598 | 448,470 |
Finance leases, less current installments | 1,481 | 2,493 |
Other non-current liabilities | 411 | 459 |
Total non-current liabilities | 460,495 | 466,265 |
Equity | ||
Additional paid-in capital | 376,277 | 368,006 |
Class A treasury stock | (3,857) | 0 |
Accumulated deficit | (155,898) | (114,525) |
Accumulated other comprehensive loss | (3,138) | (684) |
Total stockholders' equity | 213,413 | 252,826 |
Non-controlling interest | 1,899 | 2,394 |
Total equity | 215,312 | 255,220 |
Total liabilities and equity | 791,714 | 819,587 |
Class A common stock | ||
Equity | ||
Common stock value | 29 | 29 |
Class B common stock | ||
Equity | ||
Common stock value | $ 0 | $ 0 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Common stock, shares, issued (in shares) | 29,319 | 29,139 |
Treasury stock, shares outstanding (in shares) | 373 | 0 |
Class A common stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock authorized (in shares) | 125,000 | 125,000 |
Class B common stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock authorized (in shares) | 100,000 | 100,000 |
Common stock, shares, issued (in shares) | 252 | 272 |
Common stock, shares outstanding (in shares) | 252 | 272 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Total cost of sales | $ 158,955,000 | $ 168,462,000 | $ 567,055,000 | $ 586,393,000 |
Gross profit | 50,770,000 | 42,072,000 | 170,379,000 | 149,499,000 |
Operating expenses | ||||
Selling, general and administrative expenses | 45,984,000 | 45,252,000 | 144,815,000 | 129,066,000 |
Goodwill impairment | 47,264,000 | 0 | 47,264,000 | 0 |
Operating (loss) income | (42,478,000) | (3,180,000) | (21,700,000) | 20,433,000 |
Interest expense, net | 7,276,000 | 6,168,000 | 19,696,000 | 18,693,000 |
Loss on debt extinguishment | 0 | 0 | 0 | 5,453,000 |
Other expense (income), net | 172,000 | (1,337,000) | (31,000) | (1,992,000) |
Total other expense, net | 7,448,000 | 4,831,000 | 19,665,000 | 22,154,000 |
Pretax net loss | (49,926,000) | (8,011,000) | (41,365,000) | (1,721,000) |
Income tax benefit (expense) | 355,000 | (317,000) | (368,000) | (187,000) |
Net loss | (49,571,000) | (8,328,000) | (41,733,000) | (1,908,000) |
Net loss attributable to non-controlling interest | (435,000) | (426,000) | (360,000) | (65,000) |
Net loss attributable to PetIQ, Inc. | $ (49,136,000) | $ (7,902,000) | $ (41,373,000) | $ (1,843,000) |
Net loss per share attributable to PetIQ, Inc. Class A common stock | ||||
Basic (in dollars per share) | $ (1.68) | $ (0.27) | $ (1.42) | $ (0.07) |
Diluted (in dollars per share) | $ (1.68) | $ (0.27) | $ (1.42) | $ (0.07) |
Weighted Average shares of Class A common stock outstanding | ||||
Basic (in shares) | 29,224 | 28,940 | 29,224 | 27,949 |
Diluted (in shares) | 29,224 | 28,940 | 29,224 | 27,949 |
Total net sales | $ 209,725,000 | $ 210,534,000 | $ 737,434,000 | $ 735,892,000 |
Products | ||||
Total cost of sales | 131,414,000 | 142,009,000 | 485,833,000 | 510,673,000 |
Operating expenses | ||||
Goodwill impairment | 0 | |||
Weighted Average shares of Class A common stock outstanding | ||||
Total net sales | 176,217,000 | 181,557,000 | 642,981,000 | 654,448,000 |
Services | ||||
Total cost of sales | 27,541,000 | 26,453,000 | 81,222,000 | 75,720,000 |
Operating expenses | ||||
Goodwill impairment | 47,264,000 | |||
Weighted Average shares of Class A common stock outstanding | ||||
Total net sales | $ 33,508,000 | $ 28,977,000 | $ 94,453,000 | $ 81,444,000 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Comprehensive Income | ||||
Net loss | $ (49,571) | $ (8,328) | $ (41,733) | $ (1,908) |
Foreign currency translation adjustment | (942) | (711) | (2,475) | (207) |
Comprehensive loss | (50,513) | (9,039) | (44,208) | (2,115) |
Comprehensive loss attributable to non-controlling interest | (442) | (436) | (381) | (68) |
Comprehensive loss attributable to PetIQ, Inc. | $ (50,071) | $ (8,603) | $ (43,827) | $ (2,047) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities | ||
Net loss | $ (41,733,000) | $ (1,908,000) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||
Depreciation and amortization of intangible assets and loan fees | 26,564,000 | 28,936,000 |
Loss on debt extinguishment | 0 | 5,453,000 |
Loss (gain) on disposition of property, plant, and equipment | 56,000 | (1,185,000) |
Stock based compensation expense | 8,904,000 | 7,188,000 |
Goodwill impairment | 47,264,000 | 0 |
Other non-cash activity | (7,000) | 133,000 |
Changes in assets and liabilities | ||
Accounts receivable | (11,219,000) | (21,910,000) |
Inventories | (50,847,000) | (10,040,000) |
Other assets | 1,924,000 | (883,000) |
Accounts payable | 18,957,000 | (4,498,000) |
Accrued wages payable | 1,083,000 | 2,664,000 |
Other accrued expenses | (1,818,000) | 6,515,000 |
Net cash (used in) provided by operating activities | (872,000) | 10,465,000 |
Cash flows from investing activities | ||
Proceeds from disposition of property, plant, and equipment | 0 | 5,055,000 |
Purchase of property, plant, and equipment | (9,797,000) | (24,577,000) |
Net cash used in investing activities | (9,797,000) | (19,522,000) |
Cash flows from financing activities | ||
Proceeds from issuance of long-term debt | 44,000,000 | 630,568,000 |
Principal payments on long-term debt | (49,700,000) | (595,321,000) |
Repurchase of Class A common stock | (3,857,000) | 0 |
Tax distributions to LLC Owners | 0 | (70,000) |
Principal payments on finance lease obligations | (1,097,000) | (1,573,000) |
Payment of deferred financing fees and debt discount | 0 | (6,454,000) |
Tax withholding payments on Restricted Stock Units | (862,000) | (901,000) |
Exercise of options to purchase Class A common stock | 115,000 | 12,617,000 |
Net cash (used in) provided by financing activities | (11,401,000) | 38,866,000 |
Net change in cash and cash equivalents | (22,070,000) | 29,809,000 |
Effect of exchange rate changes on cash and cash equivalents | (618,000) | (91,000) |
Cash and cash equivalents, beginning of period | 79,406,000 | 33,456,000 |
Cash and cash equivalents, end of period | 56,718,000 | 63,174,000 |
Supplemental cash flow information | ||
Interest paid | 18,550,000 | 12,151,000 |
Net change in property, plant, and equipment acquired through accounts payable | 376,000 | 889,000 |
Finance lease additions | 59,000 | 544,000 |
Income taxes paid, net of refunds | 258,000 | 282,000 |
Accrued tax distribution | $ 0 | $ 7,000 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity - USD ($) $ in Thousands | Total | Accumulated Deficit | Accumulated Other Comprehensive Loss | Class A Treasury Stock | Additional Paid-in Capital | Non-controlling Interest | Class A common stock Common Stock | Class B common stock | Class B common stock Common Stock |
Increase (Decrease) in Stockholders' Equity | |||||||||
Treasury stock, shares outstanding (in shares) | 0 | ||||||||
Beginning balance at Dec. 31, 2020 | $ 246,410 | $ (98,558) | $ (686) | $ 0 | $ 319,642 | $ 25,983 | $ 26 | $ 3 | |
Beginning common stock, shares outstanding (in shares) at Dec. 31, 2020 | 25,711,000 | 3,040,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Exchange of LLC Interests held by LLC Owners (in shares) | 2,748,000 | 2,748,000 | |||||||
Exchange of LLC Interests held by LLC Owners | 0 | 66 | 23,593 | (23,659) | $ 3 | $ (3) | |||
Accrued tax distributions | (7) | (7) | |||||||
Other comprehensive income | (208) | (205) | (3) | ||||||
Stock based compensation expense | 7,188 | 6,885 | 303 | ||||||
Exercise of options to purchase common stock (in shares) | 533,000 | ||||||||
Exercise of options to purchase common stock | 12,617 | 12,617 | |||||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 73,000 | ||||||||
Issuance of stock vesting of RSU's, net of tax withholdings | (901) | (901) | |||||||
Net loss | (1,908) | (1,843) | (65) | ||||||
Ending balance at Sep. 30, 2021 | 263,191 | (100,401) | (825) | 0 | 361,836 | 2,552 | $ 29 | $ 0 | |
Ending common stock, shares outstanding (in shares) at Sep. 30, 2021 | 29,065,000 | 292,000 | |||||||
Beginning balance at Dec. 31, 2020 | $ 246,410 | (98,558) | (686) | 0 | 319,642 | 25,983 | $ 26 | $ 3 | |
Beginning common stock, shares outstanding (in shares) at Dec. 31, 2020 | 25,711,000 | 3,040,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Exercise of options to purchase common stock (in shares) | 583,000 | ||||||||
Ending balance at Dec. 31, 2021 | $ 255,220 | (114,525) | (684) | $ 0 | 368,006 | 2,394 | $ 29 | $ 0 | |
Ending common stock, shares outstanding (in shares) at Dec. 31, 2021 | 29,139,000 | 272,000 | 272,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Treasury stock, shares outstanding (in shares) | 0 | ||||||||
Beginning balance at Jun. 30, 2021 | 269,624 | (92,499) | (126) | $ 0 | 358,506 | 3,714 | $ 29 | $ 0 | |
Beginning common stock, shares outstanding (in shares) at Jun. 30, 2021 | 28,909,000 | 425,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Exchange of LLC Interests held by LLC Owners (in shares) | 133,000 | 133,000 | |||||||
Exchange of LLC Interests held by LLC Owners | 0 | 3 | 769 | (772) | $ 0 | ||||
Accrued tax distributions | 1 | 1 | |||||||
Other comprehensive income | (712) | (702) | (10) | ||||||
Stock based compensation expense | 2,627 | 2,581 | 46 | ||||||
Exercise of options to purchase common stock (in shares) | 2,000 | ||||||||
Exercise of options to purchase common stock | 29 | 29 | |||||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 21,000 | ||||||||
Issuance of stock vesting of RSU's, net of tax withholdings | (49) | (49) | |||||||
Net loss | (8,328) | (7,902) | (426) | ||||||
Ending balance at Sep. 30, 2021 | $ 263,191 | (100,401) | (825) | $ 0 | 361,836 | 2,552 | $ 29 | $ 0 | |
Ending common stock, shares outstanding (in shares) at Sep. 30, 2021 | 29,065,000 | 292,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Treasury stock, shares outstanding (in shares) | 0 | ||||||||
Treasury stock, shares outstanding (in shares) | 0 | 0 | |||||||
Beginning balance at Dec. 31, 2021 | $ 255,220 | (114,525) | (684) | $ 0 | 368,006 | 2,394 | $ 29 | $ 0 | |
Beginning common stock, shares outstanding (in shares) at Dec. 31, 2021 | 29,139,000 | 272,000 | 272,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Exchange of LLC Interests held by LLC Owners (in shares) | 20,000 | 20,000 | |||||||
Exchange of LLC Interests held by LLC Owners | 0 | 192 | (192) | ||||||
Other comprehensive income | $ (2,475) | (2,454) | (21) | ||||||
Treasury stock purchased (in shares) | 373,408 | 373,000 | |||||||
Treasury stock purchased | $ (3,857) | $ (3,857) | |||||||
Stock based compensation expense | $ 8,904 | 8,826 | 78 | ||||||
Exercise of options to purchase common stock (in shares) | 2,000 | 2,000 | |||||||
Exercise of options to purchase common stock | $ 115 | 115 | |||||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 158,000 | ||||||||
Issuance of stock vesting of RSU's, net of tax withholdings | (862) | (862) | |||||||
Net loss | (41,733) | (41,373) | (360) | ||||||
Ending balance at Sep. 30, 2022 | 215,312 | (155,898) | (3,138) | $ (3,857) | 376,277 | 1,899 | $ 29 | $ 0 | |
Ending common stock, shares outstanding (in shares) at Sep. 30, 2022 | 29,319,000 | 252,000 | 252,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Treasury stock, shares outstanding (in shares) | 0 | ||||||||
Beginning balance at Jun. 30, 2022 | 267,441 | (106,762) | (2,203) | $ 0 | 374,057 | 2,320 | $ 29 | $ 0 | |
Beginning common stock, shares outstanding (in shares) at Jun. 30, 2022 | 29,304,000 | 252,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Other comprehensive income | (942) | (935) | (7) | ||||||
Treasury stock purchased (in shares) | 373,000 | ||||||||
Treasury stock purchased | (3,857) | $ (3,857) | |||||||
Stock based compensation expense | 2,238 | 2,217 | 21 | ||||||
Issuance of stock for vesting of RSU's, net of tax with holdings (in shares) | 15,000 | ||||||||
Issuance of stock vesting of RSU's, net of tax withholdings | 3 | 3 | |||||||
Net loss | (49,571) | (49,136) | (435) | ||||||
Ending balance at Sep. 30, 2022 | $ 215,312 | $ (155,898) | $ (3,138) | $ (3,857) | $ 376,277 | $ 1,899 | $ 29 | $ 0 | |
Ending common stock, shares outstanding (in shares) at Sep. 30, 2022 | 29,319,000 | 252,000 | 252,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Treasury stock, shares outstanding (in shares) | 373,000 | 373,000 |
Principal Business Activity and
Principal Business Activity and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Principal Business Activity and Significant Accounting Policies | 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 and e-commerce channels with our branded and distributed medications as well as health and wellness items, which are further supported by our world-class medications manufacturing facility in Omaha, Nebraska and health and wellness manufacturing facility in Springville, Utah. Our national service platform, operates in over 2,600 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 that 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 and wellness 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, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and 2021 are unaudited. The condensed consolidated balance sheet as of December 31, 2021 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, 2021 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, 2022 (the "Annual Report"). 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 condensed 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 deferred tax assets, the valuation of inventories, and reserves for legal contingencies. Significant Accounting Policies The Company's significant accounting policies are discussed in Note 1 – Principal Business Activity and Significant Accounting Policies in the Annual Report. There have been no significant changes to these policies that have had a material impact on the Company's unaudited condensed financial statements and related notes during the three and nine months ended September 30, 2022. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Note 2 — Debt 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) (the "ABL"), subject to a borrowing base limitation. The borrowing base for the ABL at any time equals the sum of: (i) 90% of eligible investment-grade accounts receivable; plus (ii) 85% of eligible other accounts receivable; 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 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 interest rate at September 30, 2022 was 4.39%. 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. The ABL is due on the fifth anniversary of the agreement. 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"). 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, 2022 was 7.07%. The Term Loan B requires quarterly payments of 0.25% of the original principal amount, with the balance due on the seven The credit agreement governing the Term Loan B does not require OpCo to comply with any financial maintenance covenants but contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default. The following represents the Company’s long-term debt as of: $'s in 000's September 30, 2022 December 31, 2021 Convertible notes $ 143,750 $ 143,750 Term loans 296,250 298,500 Revolving credit facility — — Other debt 20,645 23,518 Net discount on debt and deferred financing fees (8,979) (10,418) $ 451,666 $ 455,350 Less current maturities of long-term debt (7,068) (6,880) Total long-term debt $ 444,598 $ 448,470 Future maturities of long-term debt, excluding the discount on debt and deferred financing fees, as of September 30, 2022, are as follows: ($'s in 000's) Remainder of 2022 $ 2,681 2023 7,124 2024 7,390 2025 3,600 2026 147,350 Thereafter 292,500 As part of the termination of the Company's previous debt facilities, 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 Selling, general and administrative expenses for the nine months ended September 30, 2021. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Leases | Note 3 — 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 2022 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 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, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Finance lease cost Amortization of right-of-use assets $ 455 $ 412 $ 1,438 $ 1,781 Interest on lease liabilities 64 63 185 277 Operating lease cost 1,509 1,435 4,823 4,059 Variable lease cost (1) 280 363 1,061 978 Short-term lease cost 5 4 18 10 Sublease income (65) (65) (195) (173) Total lease cost $ 2,248 $ 2,212 $ 7,330 $ 6,932 (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, 2022 September 30, 2021 Weighted-average remaining lease term (years) Operating leases 3.42 4.01 Finance leases 2.00 2.50 Weighted-average discount rate Operating leases 4.5% 5.0% Finance leases 4.5% 4.7% Annual future commitments under non-cancelable leases as of September 30, 2022, consist of the following: Lease Obligations $'s in 000's Operating Leases Finance Leases Remainder of 2022 $ 1,796 $ 407 2023 7,190 1,702 2024 5,665 622 2025 4,639 239 2026 2,288 79 Thereafter 179 — Total minimum future obligations $ 21,758 $ 3,049 Less interest (1,487) (145) Present value of net future minimum obligations 20,271 2,904 Less current lease obligations (6,266) (1,423) Long-term lease obligations $ 14,005 $ 1,481 Supplemental cash flow information: For the Nine Months Ended $'s in 000's September 30, 2022 September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 185 $ 277 Operating cash flows from operating leases 4,945 3,928 Financing cash flows from finance leases 1,097 1,573 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 3,864 4,828 Finance leases 59 141 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Note 4 — Intangible Assets and Goodwill Goodwill and non-amortizable intangible assets The Company tests goodwill and indefinite lived intangibles for impairment at least annually or more frequently whenever events or circumstances occur indicating that it might be impaired. During the three months ended September 30, 2022, the Company’s market capitalization declined significantly, driven by rising interest rates and macroeconomic conditions. Additionally, the Company has slowed its expansion plans for the Services reporting unit. Based on these events, the Company concluded that an indicator of impairment existed for the Services reporting unit related to its goodwill during the three months ended September 30, 2022. Goodwill impairment is evaluated based on a discounted cash flow method (Level 3). Significant assumptions and estimates are required, including, but not limited to, projecting future cash flows, determining appropriate discount rates and terminal growth rates, and other assumptions, to estimate the fair value of goodwill. In addition, the Company’s publicly traded market capitalization was reconciled to the sum of the fair values of the reporting units. Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results. As a result of the Company's interim impairment test, the Company determined that the fair value of the Services reporting unit was less than it's carrying value, resulting in a non-cash goodwill impairment charge of $47.3 million during the three and nine months ended September 30, 2022. No impairment was recognized for the three and nine months ended September 30, 2021. Amortizable intangibles Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Due to the aforementioned goodwill impairment, during the three months ended September 30, 2022, the Company determined that a triggering event had occurred for certain amortizable intangible assets and conducted Step 1 of impairment testing utilizing undiscounted cash flows. No additional impairment was recorded as a result of this test. Intangible assets consist of the following at: $'s in 000's Useful Lives September 30, 2022 December 31, 2021 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12-20 years 159,956 160,167 Patents and processes 5-10 years 14,494 14,843 Brand names 5-15 years 24,568 24,731 Total amortizable intangibles 199,368 200,091 Less accumulated amortization (57,339) (44,438) Total net amortizable intangibles 142,029 155,653 Non-amortizable intangibles Trademarks and other 33,239 33,341 In-process research and development 1,668 1,668 Intangible assets, net of accumulated amortization $ 176,936 $ 190,662 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, 2022 and 2021 was $4.6 million and $4.6 million, respectively, and $13.6 million and $17.7 million for the nine months ended September 30, 2022 and 2021, respectively. The in-process research and development (“IPRD”), intangible assets represent the value assigned to three acquired Research and Development ("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 $3.8 million, the expense for which is included as amortization expense in selling, general and administrative expenses on the condensed consolidated statement of operations for the nine months ended September 30, 2021. Estimated future amortization expense for each of the following years is as follows: Years ending December 31, ($'s in 000's) Remainder of 2022 $ 4,473 2023 16,875 2024 14,526 2025 13,874 2026 13,292 Thereafter 79,052 The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2021 to September 30, 2022: Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2021 183,894 47,264 231,158 Foreign currency translation (48) — (48) Goodwill as of December 31, 2021 183,846 47,264 231,110 Foreign currency translation (897) — (897) Impairment — (47,264) (47,264) Goodwill as of September 30, 2022 $ 182,949 $ — $ 182,949 |
Income Tax
Income Tax | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Note 5 — Income Tax Our effective tax rate from continuing operations was 0.7% and (0.9)% for the three and nine months ended September 30, 2022, respectively, and (4.0)% and (10.8)% for the three and nine months ended September 30, 2021, respectively, including discrete items. Income tax expense for the three and nine months ended September 30, 2022 and 2021 was different than the U.S federal statutory income tax rate of 21% primarily due to the effects of a change in valuation allowance, state taxes, and foreign global intangible low-taxed income inclusion. The Company has assessed the realizability of the net deferred tax assets as of September 30, 2022 and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income to realize its deferred tax assets. The Company believes it is more likely than not that the benefit from recorded deferred tax assets will not be realized. The Company has recorded a valuation allowance for deferred tax assets of $106.3 million as of September 30, 2022 and December 31, 2021. In future periods, if we conclude we have future taxable income sufficient to recognize the deferred tax assets, we may reduce or eliminate the valuation allowance. |
Earnings per Share
Earnings per Share | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Note 6 — 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 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 adjusted to give effect to potentially dilutive securities. 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) 2022 2021 2022 2021 Numerator: Net loss $ (49,571) $ (8,328) $ (41,733) $ (1,908) Less: net loss attributable to non-controlling interests (435) (426) (360) (65) Net loss attributable to PetIQ, Inc. — basic and diluted (49,136) (7,902) (41,373) (1,843) Denominator: Weighted-average shares of Class A common stock outstanding — basic 29,224 28,940 29,224 27,949 Dilutive effects of stock options that are convertible into Class A common stock — — — — Dilutive effect of RSUs — — — — Dilutive effect of conversion of Notes — — — — Weighted-average shares of Class A common stock outstanding — diluted 29,224 28,940 29,224 27,949 Loss per share of Class A common stock — basic $ (1.68) $ (0.27) $ (1.42) $ (0.07) Loss per share of Class A common stock — diluted $ (1.68) $ (0.27) $ (1.42) $ (0.07) 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, 2022 and 2021, 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 loss per share calculation for the three and nine months ended September 30, 2022 and 2021 as they would have been antidilutive. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Stock Based Compensation | Note 7 — Stock Based Compensation PetIQ, Inc. Omnibus Incentive Plan The PetIQ, Inc. Amended and Restated 2017 Omnibus Incentive Plan, (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. On June 22, 2022, the Company’s stockholders approved an amendment and restatement of the Plan to, among other things, increase the total number of shares of the Company’s Class A common stock reserved and available for issuance thereunder by 1,890 thousand shares resulting in a total of 5,804 thousand shares of Class A common stock issuable under the Plan. As of September 30, 2022 and 2021, 2,081 thousand and 713 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”) provided for the grant of stock options to employees hired in connection with an acquisition in 2018 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, of which 760 thousand were granted. No further grants may be made under the Inducement Plan. All awards issued under the Inducement Plan may only be settled in shares of Class A common stock. Stock Options The Company awards stock options to certain employees 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 $0.5 million and $2.7 million for the three and nine months ended September 30, 2022, respectively, and $1.7 million and $4.5 million for the three and nine months ended September 30, 2021, respectively. All stock based compensation expense is included in selling, 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, 2022 and 2021: September 30, 2022 September 30, 2021 Expected term (years) (1) 6.25 6.17 Expected volatility (2) 37.21 % 33.45 % Risk-free interest rate (3) 1.44 % 0.89 % 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, 2022 was $9.14 per option. At September 30, 2022, total unrecognized compensation cost related to unvested stock options was $3.7 million and is expected to be recognized over a weighted-average period of 2.1 years. Stock Weighted Aggregate Weighted Outstanding at January 1, 2021 2,086 $ 23.93 $ 30,302 7.2 Granted 354 35.66 Exercised (583) 23.05 $ 8,499 Forfeited (64) 24.84 Cancelled (25) 25.70 Outstanding at December 31, 2021 1,768 $ 26.51 $ 2,897 7.3 Granted 37 21.91 Exercised (2) 19.49 $ 10 Forfeited (72) 30.70 Cancelled (62) 32.96 Outstanding at September 30, 2022 1,669 $ 26.00 $ — 6.5 Options exercisable at September 30, 2022 1,130 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 Class A common stock on the date of grant. At September 30, 2022, total unrecognized compensation cost related to unvested RSUs was $17.2 million and is expected to vest over a weighted average period of 3.0 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 $6.1 million for the three and nine months ended September 30, 2022, respectively, and $1.7 million and $3.6 million for the three and nine months ended September 30, 2021, respectively. All stock based compensation expense is included in selling, 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, 2022. Number of Weighted Outstanding at January 1, 2021 317 $ 22.91 Granted 268 37.91 Settled (103) 24.81 Forfeited (23) 26.02 Outstanding at December 31, 2021 459 $ 31.08 Granted 795 20.42 Settled (202) 28.25 Forfeited (124) 37.36 Nonvested RSUs at September 30, 2022 929 $ 23.14 |
Stockholders_ Equity
Stockholders’ Equity | 9 Months Ended |
Sep. 30, 2022 | |
Stockholders' Equity Note [Abstract] | |
Stockholders’ Equity | Note 8 — Stockholders Equity Exchanges During the nine months ended September 30, 2022 holders of Class B common stock and LLC membership interests in HoldCo ("LLC Interests") exercised exchange rights and exchanged 20 thousand Class B common shares and corresponding LLC Interests for newly issued shares of Class A common stock. The LLC Agreement of HoldCo generally allows for exchanges on the last day of each calendar month. Stock repurchase program On September 6, 2022, the Company's Board of Directors authorized a stock repurchase program for up to $30 million of the Company’s outstanding shares of Class A common stock. Repurchases of Class A common stock may be made at management’s discretion from time to time in one or more transactions on the open market or in privately negotiated purchase and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under Securities Exchange Act. During the three and nine months ended September 30, 2022 the Company repurchased 373,408 shares at a weighted average price of $10.33 per share. |
Non-Controlling Interests
Non-Controlling Interests | 9 Months Ended |
Sep. 30, 2022 | |
Noncontrolling Interest [Abstract] | |
Non-Controlling Interests | Note 9 — Non-Controlling Interests The following table presents the outstanding LLC Interests and changes in LLC Interests for the periods presented. LLC Interests held % of Total $'s in 000's LLC PetIQ, Inc. Total LLC PetIQ, Inc. As of January 1, 2021 3,040 25,711 28,751 10.6 % 89.4 % Stock based compensation transactions — 660 660 Exchange transactions (2,768) 2,768 — As of December 31, 2021 272 29,139 29,411 0.9 % 99.1 % Stock based compensation transactions 160 160 Exchange transactions (20) 20 — Unit redemption — (373) (373) As of September 30, 2022 252 28,946 29,198 0.9 % 99.1 % Note that certain figures shown in the table above may not recalculate due to rounding. For the three and nine months ended September 30, 2022 the Company owned a weighted average of 99.1%, of HoldCo, and for the three and nine months ended September 30, 2021 the Company owned a weighted average of 98.6% and 95.8%, respectively. |
Customer Concentration
Customer Concentration | 9 Months Ended |
Sep. 30, 2022 | |
Risks and Uncertainties [Abstract] | |
Customer Concentration | Note 10 — Customer Concentration The Company has significant exposure to customer concentration. During the three and nine months ended September 30, 2022 , three customers individually accounted for more than 10% of sales, comprising 44% and 44% of net sales in aggregate, respectively for such periods. During the three and nine months ended September 30, 2021, two customers and one customer individually accounted for more than 10% of sales, comprising 41% and 26% of net sales in aggregate in both such periods, respectively. At September 30, 2022 two Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 51% of outstanding trade receivables, net. At December 31, 2021 one Products segment customers individually accounted for more than 10% of outstanding trade receivables, and accounted for 47% of outstanding trade receivables, net. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 11 — Commitments and Contingencies Litigation Contingencies The Company records a liability when a particular contingency is both probable and estimable. If the probable loss cannot be reasonably estimated, no accrual is recorded, but the loss contingency and the reasons to the effect that it cannot be reasonably estimated are disclosed. If a loss is reasonably possible, the Company will provide disclosure to that affect. As of September 30, 2022 and December 31, 2021 the Company had $1.2 million and $3.5 million accrued on the condensed consolidated balance sheet, respectively. The Company expenses legal costs as incurred within selling, general and administrative expenses on the condensed consolidated statements of operations. During the three and nine months ended September 30, 2021, the Company entered into mediation with a third party who had filed a class action lawsuit against the Company. As a result of that mediation, the Company accrued the expected settlement of $1.4 million as SG&A expense during the period, the settlement and final payment are expected to be finalized in the three months ended December 31, 2022. Additionally, during the nine months ended September 30, 2022, the Company settled a lawsuit brought by a former supplier to the Company related to the redemption of ownership interest for $5.5 million. The Company had an accrued obligation of $2.0 million related to the lawsuit recorded as of December 31, 2021. During the nine months ended September, 30, 2022, the Company recorded an additional $3.5 million of expense in the condensed consolidated statements of operations and paid $5.5 million in full satisfaction of the lawsuit. Commitments We have commitments for leases and long-term debt that are discussed further in Note 2, Debt, and Note 3, Leases. In addition, we have purchase obligations for goods and services, capital expenditures, and raw materials entered into in the normal course of business. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Segments | Note 12 — 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 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 Products Services Unallocated Total September 30, 2022 Net sales $ 176,217 $ 33,508 $ — $ 209,725 Segment Adjusted EBITDA 35,634 4,226 (20,651) 19,209 Depreciation expense 1,001 1,671 904 3,576 Capital expenditures 1,114 85 572 1,771 $'s in 000's Products Services Unallocated Total September 30, 2021 Net sales $ 181,557 $ 28,977 $ — $ 210,534 Segment 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 Financial information relating to the Company’s operating segments for the nine months ended: $'s in 000's Products Services Unallocated Total September 30, 2022 Net sales $ 642,981 $ 94,453 $ — $ 737,434 Segment Adjusted EBITDA 126,923 12,050 (60,588) 78,385 Depreciation expense 3,039 4,956 2,778 10,773 Capital expenditures 5,352 2,507 1,938 9,797 $'s in 000's Products Services Unallocated Total September 30, 2021 Net sales $ 654,448 $ 81,444 $ — $ 735,892 Segment 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 The following table reconciles Segment Adjusted EBITDA to Net income for the periods presented. For the three months ended For the nine months ended $'s in 000's September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Adjusted EBITDA: Product $ 35,634 $ 33,678 $ 126,923 $ 120,657 Services 4,226 3,821 12,050 8,945 Unallocated Corporate (20,651) (21,135) (60,588) (52,018) Segment Adjusted EBITDA 19,209 16,364 78,385 77,584 Adjustments: Depreciation (3,576) (3,145) (10,773) (9,419) Amortization (4,602) (4,627) (13,602) (17,682) Interest expense, net (7,276) (6,168) (19,696) (18,693) Goodwill impairment (1) (47,264) — (47,264) — Acquisition costs (2) (1,035) — (1,191) (92) Loss on debt extinguishment and related costs (3) — — — (6,438) Stock based compensation expense (2,238) (2,627) (8,904) (7,188) Non same-store adjustment (4) (2,944) (6,195) (13,575) (16,930) Integration costs and costs of discontinued clinics (5) (200) 1,041 (943) 354 Litigation expenses — (2,323) (3,802) (2,886) CFO Transition — (331) — (331) Pretax net loss $ (49,926) $ (8,011) $ (41,365) $ (1,721) Income tax (expense) benefit 355 (317) (368) (187) Net loss $ (49,571) $ (8,328) $ (41,733) $ (1,908) (1) Non-cash goodwill impairment due to a significant decline in the Company’s market capitalization, driven primarily by rising interest rates and macroeconomic conditions. Additionally, the Company made the strategic decision to slow expansion plans for the Services business this year. (2) Acquisition costs include legal, accounting, banking, consulting, diligence, and other costs related to completed and contemplated acquisitions. (3) Loss on debt extinguishment and related costs are related to our entering into two new credit facilities, including the write off of deferred financing costs and related costs. (4) Non same-store adjustment includes revenue and costs, and associated gross profit, related to our Services segment wellness centers and host partners with less than six full quarters of operating results, and also include pre-opening expenses. (5) Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses including personnel costs such as severance and signing bonuses, consulting costs, contract termination, and IT conversion costs. Depending on the type of costs, the costs are primarily in the Products and the corporate segments. Costs of discontinued clinics represent costs to close Services segment locations. Supplemental geographic disclosures are below. Nine Months Ended September 30, 2022 $'s in 000's U.S. Foreign Total Product sales $ 637,385 $ 5,597 $ 642,981 Service revenue 94,453 — 94,453 Total net sales $ 731,838 $ 5,597 $ 737,434 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 Three Months Ended September 30, 2022 $'s in 000's U.S. Foreign Total Product sales $ 174,517 $ 1,700 $ 176,217 Service revenue 33,508 — 33,508 Total net sales $ 208,026 $ 1,700 $ 209,725 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 Property, plant, and equipment by geographic location is below. September 30, 2022 December 31, 2021 United States $ 71,318 $ 75,315 Europe 3,505 1,298 Total $ 74,823 $ 76,613 |
Related Parties
Related Parties | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Parties | Note 13 — Related Parties Chris Christensen, the brother of CEO, McCord Christensen, acts as the Company’s agent at Moreton Insurance, which acts as a broker for a number of the Company’s insurance policies. The Company’s premium expense, which is generally paid directly to the relevant insurance company, amounted to $7.2 million and $6.8 million for policies that cover the nine months ended September 30, 2022 and 2021, respectively. Mr. Chris Christensen earns various forms of compensation based on the specifics of each policy. Katie Turner, the spouse of CEO, McCord Christensen, is the owner of Acadia Investor Relations LLC, (“Acadia”) which acts as the Company’s investor relations consultant. Acadia was paid $0.06 million and $0.2 million for the three and nine months ended September 30, 2022 and 2021, respectively. |
Principal Business Activity a_2
Principal Business Activity and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Use of Estimates | 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 condensed 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 deferred tax assets, the valuation of inventories, and reserves for legal contingencies. |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of components of long term debt | The following represents the Company’s long-term debt as of: $'s in 000's September 30, 2022 December 31, 2021 Convertible notes $ 143,750 $ 143,750 Term loans 296,250 298,500 Revolving credit facility — — Other debt 20,645 23,518 Net discount on debt and deferred financing fees (8,979) (10,418) $ 451,666 $ 455,350 Less current maturities of long-term debt (7,068) (6,880) Total long-term debt $ 444,598 $ 448,470 |
Future maturities of long-term debt, excluding the net discount on debt, deferred financing fees and contingent notes | Future maturities of long-term debt, excluding the discount on debt and deferred financing fees, as of September 30, 2022, are as follows: ($'s in 000's) Remainder of 2022 $ 2,681 2023 7,124 2024 7,390 2025 3,600 2026 147,350 Thereafter 292,500 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Schedule of components of lease expense | 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, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Finance lease cost Amortization of right-of-use assets $ 455 $ 412 $ 1,438 $ 1,781 Interest on lease liabilities 64 63 185 277 Operating lease cost 1,509 1,435 4,823 4,059 Variable lease cost (1) 280 363 1,061 978 Short-term lease cost 5 4 18 10 Sublease income (65) (65) (195) (173) Total lease cost $ 2,248 $ 2,212 $ 7,330 $ 6,932 (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 | Other information related to leases was as follows as of: September 30, 2022 September 30, 2021 Weighted-average remaining lease term (years) Operating leases 3.42 4.01 Finance leases 2.00 2.50 Weighted-average discount rate Operating leases 4.5% 5.0% Finance leases 4.5% 4.7% |
Summary of annual future commitments under non-cancelable leases | Annual future commitments under non-cancelable leases as of September 30, 2022, consist of the following: Lease Obligations $'s in 000's Operating Leases Finance Leases Remainder of 2022 $ 1,796 $ 407 2023 7,190 1,702 2024 5,665 622 2025 4,639 239 2026 2,288 79 Thereafter 179 — Total minimum future obligations $ 21,758 $ 3,049 Less interest (1,487) (145) Present value of net future minimum obligations 20,271 2,904 Less current lease obligations (6,266) (1,423) Long-term lease obligations $ 14,005 $ 1,481 |
Supplemental cash flow information | For the Nine Months Ended $'s in 000's September 30, 2022 September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ 185 $ 277 Operating cash flows from operating leases 4,945 3,928 Financing cash flows from finance leases 1,097 1,573 (Noncash) right-of-use assets obtained in exchange for lease obligations Operating leases 3,864 4,828 Finance leases 59 141 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets consist of the following at: $'s in 000's Useful Lives September 30, 2022 December 31, 2021 Amortizable intangibles Certification 7 years $ 350 $ 350 Customer relationships 12-20 years 159,956 160,167 Patents and processes 5-10 years 14,494 14,843 Brand names 5-15 years 24,568 24,731 Total amortizable intangibles 199,368 200,091 Less accumulated amortization (57,339) (44,438) Total net amortizable intangibles 142,029 155,653 Non-amortizable intangibles Trademarks and other 33,239 33,341 In-process research and development 1,668 1,668 Intangible assets, net of accumulated amortization $ 176,936 $ 190,662 |
Estimated future amortization expense | Estimated future amortization expense for each of the following years is as follows: Years ending December 31, ($'s in 000's) Remainder of 2022 $ 4,473 2023 16,875 2024 14,526 2025 13,874 2026 13,292 Thereafter 79,052 |
Schedule of Goodwill | The following is a summary of the changes in the carrying value of goodwill for the period from January 1, 2021 to September 30, 2022: Reporting Unit ($'s in 000's) Products Services Total Goodwill as of January 1, 2021 183,894 47,264 231,158 Foreign currency translation (48) — (48) Goodwill as of December 31, 2021 183,846 47,264 231,110 Foreign currency translation (897) — (897) Impairment — (47,264) (47,264) Goodwill as of September 30, 2022 $ 182,949 $ — $ 182,949 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock | 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) 2022 2021 2022 2021 Numerator: Net loss $ (49,571) $ (8,328) $ (41,733) $ (1,908) Less: net loss attributable to non-controlling interests (435) (426) (360) (65) Net loss attributable to PetIQ, Inc. — basic and diluted (49,136) (7,902) (41,373) (1,843) Denominator: Weighted-average shares of Class A common stock outstanding — basic 29,224 28,940 29,224 27,949 Dilutive effects of stock options that are convertible into Class A common stock — — — — Dilutive effect of RSUs — — — — Dilutive effect of conversion of Notes — — — — Weighted-average shares of Class A common stock outstanding — diluted 29,224 28,940 29,224 27,949 Loss per share of Class A common stock — basic $ (1.68) $ (0.27) $ (1.42) $ (0.07) Loss per share of Class A common stock — diluted $ (1.68) $ (0.27) $ (1.42) $ (0.07) |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
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 | 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, 2022 and 2021: September 30, 2022 September 30, 2021 Expected term (years) (1) 6.25 6.17 Expected volatility (2) 37.21 % 33.45 % Risk-free interest rate (3) 1.44 % 0.89 % 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. |
Summary of the activity of the Company's unvested stock options | Stock Weighted Aggregate Weighted Outstanding at January 1, 2021 2,086 $ 23.93 $ 30,302 7.2 Granted 354 35.66 Exercised (583) 23.05 $ 8,499 Forfeited (64) 24.84 Cancelled (25) 25.70 Outstanding at December 31, 2021 1,768 $ 26.51 $ 2,897 7.3 Granted 37 21.91 Exercised (2) 19.49 $ 10 Forfeited (72) 30.70 Cancelled (62) 32.96 Outstanding at September 30, 2022 1,669 $ 26.00 $ — 6.5 Options exercisable at September 30, 2022 1,130 |
Summary of RSU activity | The following table summarizes the activity of the Company’s RSUs for the period ended September 30, 2022. Number of Weighted Outstanding at January 1, 2021 317 $ 22.91 Granted 268 37.91 Settled (103) 24.81 Forfeited (23) 26.02 Outstanding at December 31, 2021 459 $ 31.08 Granted 795 20.42 Settled (202) 28.25 Forfeited (124) 37.36 Nonvested RSUs at September 30, 2022 929 $ 23.14 |
Non-Controlling Interests (Tabl
Non-Controlling Interests (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Noncontrolling Interest [Abstract] | |
Summary of noncontrolling interest | The following table presents the outstanding LLC Interests and changes in LLC Interests for the periods presented. LLC Interests held % of Total $'s in 000's LLC PetIQ, Inc. Total LLC PetIQ, Inc. As of January 1, 2021 3,040 25,711 28,751 10.6 % 89.4 % Stock based compensation transactions — 660 660 Exchange transactions (2,768) 2,768 — As of December 31, 2021 272 29,139 29,411 0.9 % 99.1 % Stock based compensation transactions 160 160 Exchange transactions (20) 20 — Unit redemption — (373) (373) As of September 30, 2022 252 28,946 29,198 0.9 % 99.1 % |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
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 Products Services Unallocated Total September 30, 2022 Net sales $ 176,217 $ 33,508 $ — $ 209,725 Segment Adjusted EBITDA 35,634 4,226 (20,651) 19,209 Depreciation expense 1,001 1,671 904 3,576 Capital expenditures 1,114 85 572 1,771 $'s in 000's Products Services Unallocated Total September 30, 2021 Net sales $ 181,557 $ 28,977 $ — $ 210,534 Segment 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 Financial information relating to the Company’s operating segments for the nine months ended: $'s in 000's Products Services Unallocated Total September 30, 2022 Net sales $ 642,981 $ 94,453 $ — $ 737,434 Segment Adjusted EBITDA 126,923 12,050 (60,588) 78,385 Depreciation expense 3,039 4,956 2,778 10,773 Capital expenditures 5,352 2,507 1,938 9,797 $'s in 000's Products Services Unallocated Total September 30, 2021 Net sales $ 654,448 $ 81,444 $ — $ 735,892 Segment 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 |
Summary of reconciles segment adjusted ebitda to pretax net income | The following table reconciles Segment Adjusted EBITDA to Net income for the periods presented. For the three months ended For the nine months ended $'s in 000's September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Adjusted EBITDA: Product $ 35,634 $ 33,678 $ 126,923 $ 120,657 Services 4,226 3,821 12,050 8,945 Unallocated Corporate (20,651) (21,135) (60,588) (52,018) Segment Adjusted EBITDA 19,209 16,364 78,385 77,584 Adjustments: Depreciation (3,576) (3,145) (10,773) (9,419) Amortization (4,602) (4,627) (13,602) (17,682) Interest expense, net (7,276) (6,168) (19,696) (18,693) Goodwill impairment (1) (47,264) — (47,264) — Acquisition costs (2) (1,035) — (1,191) (92) Loss on debt extinguishment and related costs (3) — — — (6,438) Stock based compensation expense (2,238) (2,627) (8,904) (7,188) Non same-store adjustment (4) (2,944) (6,195) (13,575) (16,930) Integration costs and costs of discontinued clinics (5) (200) 1,041 (943) 354 Litigation expenses — (2,323) (3,802) (2,886) CFO Transition — (331) — (331) Pretax net loss $ (49,926) $ (8,011) $ (41,365) $ (1,721) Income tax (expense) benefit 355 (317) (368) (187) Net loss $ (49,571) $ (8,328) $ (41,733) $ (1,908) (1) Non-cash goodwill impairment due to a significant decline in the Company’s market capitalization, driven primarily by rising interest rates and macroeconomic conditions. Additionally, the Company made the strategic decision to slow expansion plans for the Services business this year. (2) Acquisition costs include legal, accounting, banking, consulting, diligence, and other costs related to completed and contemplated acquisitions. (3) Loss on debt extinguishment and related costs are related to our entering into two new credit facilities, including the write off of deferred financing costs and related costs. (4) Non same-store adjustment includes revenue and costs, and associated gross profit, related to our Services segment wellness centers and host partners with less than six full quarters of operating results, and also include pre-opening expenses. (5) Integration costs and costs of discontinued clinics represent costs related to integrating the acquired businesses including personnel costs such as severance and signing bonuses, consulting costs, contract termination, and IT conversion costs. Depending on the type of costs, the costs are primarily in the Products and the corporate segments. Costs of discontinued clinics represent costs to close Services segment locations. |
Long-lived assets by geographic areas | Supplemental geographic disclosures are below. Nine Months Ended September 30, 2022 $'s in 000's U.S. Foreign Total Product sales $ 637,385 $ 5,597 $ 642,981 Service revenue 94,453 — 94,453 Total net sales $ 731,838 $ 5,597 $ 737,434 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 Three Months Ended September 30, 2022 $'s in 000's U.S. Foreign Total Product sales $ 174,517 $ 1,700 $ 176,217 Service revenue 33,508 — 33,508 Total net sales $ 208,026 $ 1,700 $ 209,725 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 Property, plant, and equipment by geographic location is below. September 30, 2022 December 31, 2021 United States $ 71,318 $ 75,315 Europe 3,505 1,298 Total $ 74,823 $ 76,613 |
Principal Business Activity a_3
Principal Business Activity and Significant Accounting Policies (Details) | 9 Months Ended |
Sep. 30, 2022 distributionCenter location state segment | |
Accounting Policies [Abstract] | |
Number of points of distribution | distributionCenter | 60,000 |
Number of retail pharmacy locations | location | 2,600 |
Number of states in which the entity provides veterinary services to pet owners | state | 41 |
Number of reportable segments | segment | 2 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 13, 2021 | Sep. 30, 2022 | |
Debt | ||
Amortization schedule | 7 years | |
Senior Secured Asset-Based Revolving Credit Facility | ||
Debt | ||
Maximum borrowing capacity | $ 125 | |
Line of credit facility contingent increase, additional borrowing capacity | $ 50 | |
Eligible investment - grade accounts | 90% | |
Percentage of eligible investment other accounts | 85% | |
Percentage of net orderly liquidation value of cost of certain eligible on hand and in transit inventory | 85% | |
Percentage of qualified cash | 100% | |
Line of credit facility, interest rate at period end | 4.39% | |
Unused facility fee (as a percent) | 0.35% | |
Senior Secured Term Loan Facility | ||
Debt | ||
Maximum borrowing capacity | $ 300 | |
Line of credit facility, interest rate at period end | 7.07% | |
Floor rate | 0.50% | |
Percentage of periodic payment, principal | 0.25% | |
Senior Secured Term Loan Facility | LIBOR | Minimum | ||
Debt | ||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 3.25% | |
Senior Secured Term Loan Facility | LIBOR | Maximum | ||
Debt | ||
Variable interest rate, basis points spread over variable reference rate (as a percent) | 4.25% | |
Notes Payable Vip Acquisition | ||
Debt | ||
Wrote off deferred financing fees to loss on debt extinguishment | $ 5.5 | |
Transaction cost on termination of debt instrument | $ 0.9 |
Debt - Long term debt schedule
Debt - Long term debt schedule (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt | ||
Other debt | $ 20,645 | $ 23,518 |
Net discount on debt and deferred financing fees | (8,979) | (10,418) |
Long-term debt | 451,666 | 455,350 |
Less current maturities of long-term debt | (7,068) | (6,880) |
Long-term debt, less current installments | 444,598 | 448,470 |
Term loans | ||
Debt | ||
Outstanding balance | 296,250 | 298,500 |
Revolving credit facility | ||
Debt | ||
Outstanding balance | 0 | 0 |
Convertible Notes | ||
Debt | ||
Outstanding balance | $ 143,750 | $ 143,750 |
Debt - Future Maturities (Detai
Debt - Future Maturities (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Long-term Debt, Fiscal Year Maturity [Abstract] | |
Remainder of 2022 | $ 2,681 |
2023 | 7,124 |
2024 | 7,390 |
2025 | 3,600 |
2026 | 147,350 |
Thereafter | $ 292,500 |
Leases - Narrative (Details)
Leases - Narrative (Details) | Sep. 30, 2022 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Renewal options term | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Renewal options term | 10 years |
Leases - Components of lease ex
Leases - Components of lease expense and other information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Lease cost | ||||
Amortization of right-of-use assets | $ 455 | $ 412 | $ 1,438 | $ 1,781 |
Interest on lease liabilities | 64 | 63 | 185 | 277 |
Operating lease cost | 1,509 | 1,435 | 4,823 | 4,059 |
Variable lease cost | 280 | 363 | 1,061 | 978 |
Short-term lease cost | 5 | 4 | 18 | 10 |
Sublease income | (65) | (65) | (195) | (173) |
Total lease cost | $ 2,248 | $ 2,212 | $ 7,330 | $ 6,932 |
Weighted-average remaining lease term (years) | ||||
Operating leases | 3 years 5 months 1 day | 4 years 3 days | 3 years 5 months 1 day | 4 years 3 days |
Finance leases | 2 years | 2 years 6 months | 2 years | 2 years 6 months |
Weighted-average discount rate | ||||
Operating leases | 4.50% | 5% | 4.50% | 5% |
Finance leases | 4.50% | 4.70% | 4.50% | 4.70% |
Leases - Annual future commitme
Leases - Annual future commitments under non-cancelable leases (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Operating Leases | ||
Remainder of 2022 | $ 1,796 | |
2023 | 7,190 | |
2024 | 5,665 | |
2025 | 4,639 | |
2026 | 2,288 | |
Thereafter | 179 | |
Total minimum future obligations | 21,758 | |
Less interest | (1,487) | |
Present value of net future minimum obligations | 20,271 | |
Less current lease obligations | (6,266) | $ (6,500) |
Operating leases, less current installments | 14,005 | 14,843 |
Finance Leases | ||
Remainder of 2022 | 407 | |
2023 | 1,702 | |
2024 | 622 | |
2025 | 239 | |
2026 | 79 | |
Thereafter | 0 | |
Total minimum future obligations | 3,049 | |
Less interest | (145) | |
Present value of net future minimum obligations | 2,904 | |
Less current lease obligations | (1,423) | |
Long-term lease obligations | $ 1,481 | $ 2,493 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows from finance leases | $ 185 | $ 277 |
Operating cash flows from operating leases | 4,945 | 3,928 |
Financing cash flows from finance leases | 1,097 | 1,573 |
(Noncash) right-of-use assets obtained in exchange for lease obligations | ||
Operating leases | 3,864 | 4,828 |
Finance leases | $ 59 | $ 141 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill - Additional information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Goodwill impairment | $ 47,264,000 | $ 0 | $ 47,264,000 | $ 0 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Intangible Assets (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) project | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Intangible Assets and Goodwill | |||||
Amortizable Intangibles, gross | $ 199,368 | $ 199,368 | $ 200,091 | ||
Less accumulated amortization | (57,339) | (57,339) | (44,438) | ||
Total net amortizable intangibles | 142,029 | 142,029 | 155,653 | ||
Intangible assets, net of accumulated amortization | 176,936 | 176,936 | 190,662 | ||
Amortization expense | 4,600 | $ 4,600 | $ 13,600 | $ 17,700 | |
Number of acquired R&D projects | project | 2 | ||||
Selling, general and administrative expenses | 45,984 | $ 45,252 | $ 144,815 | $ 129,066 | |
Trademarks and other | |||||
Intangible Assets and Goodwill | |||||
Non-amortizable intangibles | 33,239 | 33,239 | 33,341 | ||
In-process research and development | |||||
Intangible Assets and Goodwill | |||||
Non-amortizable intangibles | 1,668 | $ 1,668 | 1,668 | ||
Number of acquired R&D projects | project | 3 | ||||
Selling, general and administrative expenses | $ 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 | 159,956 | 159,956 | 160,167 | ||
Patents and processes | |||||
Intangible Assets and Goodwill | |||||
Amortizable Intangibles, gross | 14,494 | 14,494 | 14,843 | ||
Brand names | |||||
Intangible Assets and Goodwill | |||||
Amortizable Intangibles, gross | $ 24,568 | $ 24,568 | $ 24,731 | ||
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 Goodwil_4
Intangible Assets and Goodwill - Estimated future amortization expense (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2022 | $ 4,473 |
2023 | 16,875 |
2024 | 14,526 |
2025 | 13,874 |
2026 | 13,292 |
Thereafter | $ 79,052 |
Intangible Assets and Goodwil_5
Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | $ 231,110,000 | $ 231,158,000 | $ 231,158,000 | ||
Foreign currency translation | (897,000) | (48,000) | |||
Goodwill impairment | $ (47,264,000) | $ 0 | (47,264,000) | 0 | |
Goodwill, ending balance | 182,949,000 | 182,949,000 | 231,110,000 | ||
Products | |||||
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | 183,846,000 | 183,894,000 | 183,894,000 | ||
Foreign currency translation | (897,000) | (48,000) | |||
Goodwill impairment | 0 | ||||
Goodwill, ending balance | 182,949,000 | 182,949,000 | 183,846,000 | ||
Services | |||||
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | 47,264,000 | $ 47,264,000 | 47,264,000 | ||
Foreign currency translation | 0 | 0 | |||
Goodwill impairment | (47,264,000) | ||||
Goodwill, ending balance | $ 0 | $ 0 | $ 47,264,000 |
Income Tax (Details)
Income Tax (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |||||
Effective tax rate | 0.70% | (4.00%) | (0.90%) | (10.80%) | |
Deferred tax assets, valuation allowance | $ 106.3 | $ 106.3 | $ 106.3 |
Earnings per Share - Reconcilia
Earnings per Share - Reconciliation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Numerator: | ||||
Net loss | $ (49,571) | $ (8,328) | $ (41,733) | $ (1,908) |
Less: net loss attributable to non-controlling interests | (435) | (426) | (360) | (65) |
Net loss attributable to PetIQ, Inc. | $ (49,136) | $ (7,902) | $ (41,373) | $ (1,843) |
Denominator: | ||||
Weighted-average shares of Class A common stock outstanding -- basic (in shares) | 29,224 | 28,940 | 29,224 | 27,949 |
Dilutive effect of conversion of debt securities (in shares) | 0 | 0 | 0 | 0 |
Weighted-average shares of Class A common stock outstanding - diluted (in shares) | 29,224 | 28,940 | 29,224 | 27,949 |
Earnings Per Share | ||||
Loss per share of Class A common stock - basic (in dollars per share) | $ (1.68) | $ (0.27) | $ (1.42) | $ (0.07) |
Loss per share of Class A common stock - diluted (in dollars per share) | $ (1.68) | $ (0.27) | $ (1.42) | $ (0.07) |
Stock options | ||||
Denominator: | ||||
Dilutive effect of share-based payment arrangements (in shares) | 0 | 0 | 0 | 0 |
RSU | ||||
Denominator: | ||||
Dilutive effect of share-based payment arrangements (in shares) | 0 | 0 | 0 | 0 |
Stock Based Compensation (Detai
Stock Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 22, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Stock Based Compensation | ||||||
Granted (in shares) | 37 | 354 | ||||
Vesting percentage on each anniversary of the grant date | 25% | |||||
Maximum term for stock options | 6 years 3 months | 6 years 2 months 1 day | ||||
Stock based compensation expense | $ 2,238 | $ 2,627 | $ 8,904 | $ 7,188 | ||
Weighted average grant date fair value of stock options granted (in dollars per share) | $ 9.14 | |||||
Unrecognized compensation cost related to unvested stock options | $ 3,700 | $ 3,700 | ||||
Unrecognized compensation cost related to unvested options, recognized weighted-average period | 2 years 1 month 6 days | |||||
Class A common stock | ||||||
Stock Based Compensation | ||||||
Number of shares reserved (in shares) | 800 | 800 | ||||
Granted (in shares) | 760 | |||||
Class A common stock | Omnibus Plan | ||||||
Stock Based Compensation | ||||||
Number of shares increase per amendment (in shares) | 1,890 | |||||
Shares reserved for future issuance (in shares) | 5,804 | 5,804 | ||||
Share available for issuance (in shares) | 2,081 | 713 | 2,081 | 713 | ||
Maximum | ||||||
Stock Based Compensation | ||||||
Maximum term for stock options | 10 years | |||||
Stock options | ||||||
Stock Based Compensation | ||||||
Stock based compensation expense | $ 500 | $ 1,700 | $ 2,700 | $ 4,500 |
Stock Based Compensation - Weig
Stock Based Compensation - Weighted Average Assumptions (Details) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | ||
Expected term (years) | 6 years 3 months | 6 years 2 months 1 day |
Expected volatility | 37.21% | 33.45% |
Risk-free interest rate | 1.44% | 0.89% |
Dividend yield | 0% | 0% |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Unvested Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | 9 Months Ended | 12 Months Ended |
Jun. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Stock Options (in 000's) | |||
Stock options outstanding - beginning balance (in shares) | 1,768 | 1,768 | 2,086 |
Granted (in shares) | 37 | 354 | |
Exercised (in shares) | (2) | (583) | |
Forfeited (in shares) | (72) | (64) | |
Cancelled (in shares) | (62) | (25) | |
Stock options outstanding - ending balance (in shares) | 1,669 | 1,768 | |
Options exercisable (in shares) | 1,130 | ||
Weighted Average Exercise Price | |||
Beginning balance (in dollars per share) | $ 26.51 | $ 26.51 | $ 23.93 |
Granted (in dollars per share) | 21.91 | 35.66 | |
Exercised (in dollars per share) | 19.49 | 23.05 | |
Forfeited (in dollars per share) | 30.70 | 24.84 | |
Cancelled (in dollars per share) | 32.96 | 25.70 | |
Ending balance (in dollars per share) | $ 26 | $ 26.51 | |
Aggregate Intrinsic Value | |||
Aggregate intrinsic value of shares outstanding, period start | $ 2,897 | $ 2,897 | $ 30,302 |
Aggregate intrinsic value - exercised | 10 | 8,499 | |
Aggregate intrinsic value of shares outstanding, period end | $ 0 | $ 2,897 | |
Weighted average remaining contractual life (years) | 7 years 3 months 18 days | 6 years 6 months | 7 years 2 months 12 days |
Stock Based Compensation - Rest
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, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Unrecognized compensation cost related to unvested stock options | $ 3,700 | $ 3,700 | |||
Stock based compensation expense | 2,238 | $ 2,627 | 8,904 | $ 7,188 | |
RSU | |||||
Unrecognized compensation cost related to unvested stock options | 17,200 | $ 17,200 | |||
Vesting period | 3 years | ||||
Stock based compensation expense | $ 1,700 | $ 1,700 | $ 6,100 | $ 3,600 | |
Number of Shares | |||||
Beginning balance (in shares) | 459 | 317 | 317 | ||
Granted (in shares) | 795 | 268 | |||
Settled (in shares) | (202) | (103) | |||
Forfeited (in shares) | (124) | (23) | |||
Ending balance (in shares) | 929 | 929 | 459 | ||
Weighted Average Grant Date Fair Value | |||||
Beginning balance (in dollars per share) | $ 31.08 | $ 22.91 | $ 22.91 | ||
Granted (in dollars per share) | 20.42 | 37.91 | |||
Settled (in dollars per share) | 28.25 | 24.81 | |||
Forfeited (in dollars per share) | 37.36 | 26.02 | |||
Ending balance (in dollars per share) | $ 23.14 | $ 23.14 | $ 31.08 |
Stockholders_ Equity (Details)
Stockholders’ Equity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 06, 2022 | |
Equity, Class of Treasury Stock [Line Items] | |||
Exchange of common shares (in shares) | 20,000 | ||
Stock repurchase program authorized amount | $ 30,000,000 | ||
Treasury stock purchased (in shares) | 373,408 | ||
Shares repurchased, Average price per share (in dollars per share) | $ 10.33 | $ 10.33 | |
Treasury Stock | |||
Equity, Class of Treasury Stock [Line Items] | |||
Treasury stock purchased (in shares) | 373,408 |
Non-Controlling Interests (Deta
Non-Controlling Interests (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Exchange transactions (in shares) | 20 | |||||
Continuing LLC Owners | ||||||
Beginning common stock, shares outstanding (in shares) | 272 | 3,040 | 3,040 | |||
Stock based compensation adjustments (in shares) | 0 | |||||
Exchange transactions (in shares) | 20 | 2,768 | ||||
Unit redemption (in shares) | 0 | |||||
Ending common stock, shares outstanding (in shares) | 252 | 252 | 272 | |||
Amended Holdco LLC Agreement | ||||||
Beginning common stock, shares outstanding (in shares) | 29,411 | 28,751 | 28,751 | |||
Stock based compensation adjustments (in shares) | 160 | 660 | ||||
Exchange transactions (in shares) | 0 | 0 | ||||
Unit redemption (in shares) | (373) | |||||
Ending common stock, shares outstanding (in shares) | 29,198 | 29,198 | 29,411 | |||
Holdco | ||||||
Weighted average ownership percentage in Holdco | 99.10% | 98.60% | 99.10% | 95.80% | ||
Continuing LLC Owners | ||||||
Ownership interest by continuing LLC owners | 0.90% | 0.90% | 0.90% | 10.60% | ||
PetIQ | ||||||
Beginning common stock, shares outstanding (in shares) | 29,139 | 25,711 | 25,711 | |||
Stock based compensation adjustments (in shares) | 160 | 660 | ||||
Exchange transactions (in shares) | 20 | 2,768 | ||||
Unit redemption (in shares) | (373) | |||||
Ending common stock, shares outstanding (in shares) | 28,946 | 28,946 | 29,139 | |||
Ownership interest in Holdco | 99.10% | 99.10% | 99.10% | 89.40% |
Customer Concentration (Details
Customer Concentration (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Customer concentrations | Revenue from Contract with Customer, Product and Service Benchmark | Three Customers | |||||
Customer Concentration | |||||
Concentration risk | 44% | 44% | |||
Customer concentrations | Revenue from Contract with Customer, Product and Service Benchmark | One Customer | |||||
Customer Concentration | |||||
Concentration risk | 26% | ||||
Customer concentrations | Revenue from Contract with Customer, Product and Service Benchmark | Two Customers | |||||
Customer Concentration | |||||
Concentration risk | 41% | ||||
Credit concentrations | Accounts receivable | Three Customers | |||||
Customer Concentration | |||||
Concentration risk | 51% | ||||
Credit concentrations | Accounts receivable | One Customer | |||||
Customer Concentration | |||||
Concentration risk | 47% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Sep. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | |
Litigation Contingencies | ||||
Liability recorded | $ 1.2 | $ 3.5 | ||
Mediation With Third Party | ||||
Litigation Contingencies | ||||
Liability recorded | $ 1.4 | |||
Lawsuit By Former Supplier For Redemption Of Ownership Interest | ||||
Litigation Contingencies | ||||
Liability recorded | $ 2 | |||
Litigation settlement, amount award to other party | 5.5 | |||
Loss contingency accrual, provision | 3.5 | |||
Loss contingency accrual, payments | $ 5.5 |
Segments - Additional Informati
Segments - Additional Information (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segments - Operating Segments (
Segments - Operating Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Segments | ||||
Net sales | $ 209,725 | $ 210,534 | $ 737,434 | $ 735,892 |
Adjusted EBITDA | 19,209 | 16,364 | 78,385 | 77,584 |
Depreciation expense | 3,576 | 3,145 | 10,773 | 9,419 |
Capital expenditures | 1,771 | 6,275 | 9,797 | 24,577 |
Products | ||||
Segments | ||||
Net sales | 176,217 | 181,557 | 642,981 | 654,448 |
Services | ||||
Segments | ||||
Net sales | 33,508 | 28,977 | 94,453 | 81,444 |
Operating Segments | Products | ||||
Segments | ||||
Net sales | 176,217 | 181,557 | 642,981 | 654,448 |
Adjusted EBITDA | 35,634 | 33,678 | 126,923 | 120,657 |
Depreciation expense | 1,001 | 982 | 3,039 | 2,913 |
Capital expenditures | 1,114 | 578 | 5,352 | 1,533 |
Operating Segments | Services | ||||
Segments | ||||
Net sales | 33,508 | 28,977 | 94,453 | 81,444 |
Adjusted EBITDA | 4,226 | 3,821 | 12,050 | 8,945 |
Depreciation expense | 1,671 | 1,454 | 4,956 | 3,924 |
Capital expenditures | 85 | 2,177 | 2,507 | 8,810 |
Unallocated Corporate | ||||
Segments | ||||
Adjusted EBITDA | (20,651) | (21,135) | (60,588) | (52,018) |
Depreciation expense | 904 | 709 | 2,778 | 2,582 |
Capital expenditures | $ 572 | $ 3,520 | $ 1,938 | $ 14,234 |
Segments - Reconciliation (Deta
Segments - Reconciliation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Adjusted EBITDA | $ 19,209,000 | $ 16,364,000 | $ 78,385,000 | $ 77,584,000 |
Depreciation | (3,576,000) | (3,145,000) | (10,773,000) | (9,419,000) |
Amortization | (4,602,000) | (4,627,000) | (13,602,000) | (17,682,000) |
Interest expense, net | (7,276,000) | (6,168,000) | (19,696,000) | (18,693,000) |
Goodwill impairment | 47,264,000 | 0 | 47,264,000 | 0 |
Acquisition costs | (1,035,000) | 0 | (1,191,000) | (92,000) |
Loss on debt extinguishment and related costs | 0 | 0 | 0 | (6,438,000) |
Stock based compensation expense | (2,238,000) | (2,627,000) | (8,904,000) | (7,188,000) |
Non same store adjustment | (2,944,000) | (6,195,000) | (13,575,000) | (16,930,000) |
Integration costs | (200,000) | 1,041,000 | (943,000) | 354,000 |
Litigation expenses | 0 | (2,323,000) | (3,802,000) | (2,886,000) |
CFO Transition | 0 | (331,000) | 0 | (331,000) |
Pretax net loss | (49,926,000) | (8,011,000) | (41,365,000) | (1,721,000) |
Income tax benefit (expense) | 355,000 | (317,000) | (368,000) | (187,000) |
Net loss | (49,571,000) | (8,328,000) | (41,733,000) | (1,908,000) |
Unallocated Corporate | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Adjusted EBITDA | (20,651,000) | (21,135,000) | (60,588,000) | (52,018,000) |
Products | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Goodwill impairment | 0 | |||
Products | Operating Segments | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Adjusted EBITDA | 35,634,000 | 33,678,000 | 126,923,000 | 120,657,000 |
Services | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Goodwill impairment | 47,264,000 | |||
Services | Operating Segments | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Adjusted EBITDA | $ 4,226,000 | $ 3,821,000 | $ 12,050,000 | $ 8,945,000 |
Segments - Supplemental revenue
Segments - Supplemental revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Segments | ||||
Total net sales | $ 209,725 | $ 210,534 | $ 737,434 | $ 735,892 |
Products | ||||
Segments | ||||
Total net sales | 176,217 | 181,557 | 642,981 | 654,448 |
Services | ||||
Segments | ||||
Total net sales | 33,508 | 28,977 | 94,453 | 81,444 |
United States | ||||
Segments | ||||
Total net sales | 208,026 | 208,736 | 731,838 | 730,676 |
United States | Products | ||||
Segments | ||||
Total net sales | 174,517 | 179,759 | 637,385 | 649,232 |
United States | Services | ||||
Segments | ||||
Total net sales | 33,508 | 28,977 | 94,453 | 81,444 |
Foreign | ||||
Segments | ||||
Total net sales | 1,700 | 1,798 | 5,597 | 5,216 |
Foreign | Products | ||||
Segments | ||||
Total net sales | 1,700 | 1,798 | 5,597 | 5,216 |
Foreign | Services | ||||
Segments | ||||
Total net sales | $ 0 | $ 0 | $ 0 | $ 0 |
Segments - Property, plant, and
Segments - Property, plant, and equipment by geographic location (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Property, plant and equipment, net | $ 74,823 | $ 76,613 |
United States | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Property, plant and equipment, net | 71,318 | 75,315 |
Europe | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Property, plant and equipment, net | $ 3,505 | $ 1,298 |
Related Parties (Details)
Related Parties (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
CEO Spouse, Katie Turner | ||||
Related Parties | ||||
Related party expenses | $ 60 | $ 60 | $ 200 | $ 200 |
Insurance Policy Premiums | CEO Brother, Chris Christensen | ||||
Related Parties | ||||
Premium expense | $ 7,200 | $ 6,800 | $ 7,200 | $ 6,800 |