petq-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38163

PetIQ, Inc.

(Exact name of registrant as specified in its charter)


Delaware			35-2554312
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
230 E. Riverside Drive			83616
Eagle, Idaho			(Zip Code)
(Address of principal executive offices)

208-939-8900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading
Symbol

Name of Each Exchange on Which Registered

Class A Common Stock, $0.001 par value

PETQ

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

As of August 5, 2024, we had 29,654,234 shares of Class A common stock and 231,540 shares of Class B common stock outstanding.

PetIQ, Inc.

Table of Contents


			Page

Part I.	Financial Information		3

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		PetIQ, Inc. Condensed Consolidated Balance Sheets	4
		PetIQ, Inc. Condensed Consolidated Statements of Operations	5
		PetIQ, Inc. Condensed Consolidated Statements of Comprehensive Income	6
		PetIQ, Inc. Condensed Consolidated Statements of Cash Flows	7
		PetIQ, Inc. Condensed Consolidated Statements of Equity	9
		PetIQ, Inc. Notes to Condensed Consolidated Financial Statements	11
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4.	Controls and Procedures	33

Part II.	Other Information

	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	34
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
	Item 3.	Defaults Upon Senior Securities	35
	Item 4.	Mine Safety Disclosures	35
	Item 5.	Other Information	35
	Item 6.	Exhibits	36

Signatures			37

PART I —FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continuing,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “project,” “should,” “will,” and similar expressions. Examples of forward-looking statements include, without limitation:

•statements concerning our proposed acquisition by entities affiliated with Bansk Group;

•statements of our expectations regarding the timing and completion of the proposed acquisition by entities affiliated with Bansk Group;

•statements regarding our strategies, results of operations or liquidity;

•statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance;

•statements of management’s goals and objectives; and

•assumptions underlying statements regarding us or our business.

Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, factors discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q; general economic or market conditions, including inflation and interest rates; overall consumer spending in our industry; our ability to successfully grow our business through acquisitions and our ability to integrate acquisitions; our dependency on a limited number of customers; our ability to implement our growth strategy effectively; our ability to continue to grow our Services segment; disruptions in our manufacturing, shipping, transportation and distribution chains; competition from veterinarians and others in our industry; reputational damage to our brands; the effectiveness of our marketing and trade promotion programs; recalls or withdrawals of our products or product liability claims; our ability to introduce new products and improve existing products; our failure to protect our intellectual property; costs associated with governmental regulation; our ability to keep and retain key employees; our ability to sustain profitability; cybersecurity risks, including breaches that result in business interruption and data loss; our substantial indebtedness and our ability to raise additional capital as needed; conditions to the closing of the pending Merger, including obtaining required regulatory approvals, which may not be satisfied or waived on a timely basis or otherwise; unforeseen events, changes or other circumstances could give rise to the termination of the Merger Agreement or affect the ability to recognize the benefits of the pending Merger; potential disruptions in current plans and operations caused by the pending Merger, including potential difficulties in employee retention; our ability to consummate the pending Merger within the expected time frame, or at all (see "Note 12 – Subsequent Events – Pending Merger with Bansk Group” in the Notes to the Condensed Consolidated Financial Statements included in Part I Item 1 and Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q); and the risks set forth under the “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 and other reports filed from time to time with the Securities and Exchange Commission.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.


PetIQ, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in 000’s except for per share amounts)


	June 30, 2024		December 31, 2023
Current assets
Cash and cash equivalents	$	84,130	$	116,369
Accounts receivable, net	214,978		142,511
Inventories	164,965		159,309
Other current assets	6,972		12,645
Total current assets	471,045		430,834
Property, plant and equipment, net	53,845		57,097
Operating lease right of use assets	16,804		19,079
Other non-current assets	1,675		2,083
Intangible assets, net	151,620		159,729
Goodwill	199,404		199,404
Total assets	$	894,393	$	868,226
Liabilities and equity
Current liabilities
Accounts payable	$	142,230	$	139,264
Accrued wages payable	14,175		16,734
Accrued interest payable	1,130		6,636
Other accrued expenses	12,357		10,692
Current portion of operating leases	5,827		7,608
Current portion of long-term debt and finance leases	6,959		8,595
Total current liabilities	182,678		189,529
Operating leases, less current installments	11,446		13,763
Long-term debt, less current installments	436,011		437,820
Finance leases, less current installments	343		516
Other non-current liabilities	3,600		3,600
Total non-current liabilities	451,400		455,699
Equity
Additional paid-in capital	392,169		387,349
Class A common stock, par value $0.001 per share, 125,000 shares authorized; 29,999 and 29,570 shares issued, respectively	29		29
Class B common stock, par value $0.001 per share, 8,402 shares authorized; 231 and 231 shares issued and outstanding, respectively	—		—
Class A treasury stock, at cost, 373 and 373 shares respectively	(3,857)		(3,857)
Accumulated deficit	(130,373)		(160,602)
Accumulated other comprehensive loss	—		(1,706)
Total stockholders' equity	257,968		221,213
Non-controlling interest	2,347		1,785
Total equity	260,315		222,998
Total liabilities and equity	$	894,393	$	868,226

See accompanying notes to the condensed consolidated financial statements.


PetIQ, Inc. Condensed Consolidated Statements of Operations (Unaudited, in 000’s except for per share amounts)


	For the Three Months Ended				For the Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023

Product sales	$	291,200	$	278,167	$	568,091	$	537,160
Services sales	37,741		36,380		69,293		67,858
Total net sales	328,941		314,547		637,384		605,018
Cost of products sold	212,650		210,428		421,713		411,330
Cost of services	28,008		30,240		52,845		57,549
Total cost of sales	240,658		240,668		474,558		468,879
Gross profit	88,283		73,879		162,826		136,139
Operating expenses
Selling, general and administrative expenses	60,082		55,159		110,291		98,486

Impairment and other asset charges	2,620		—		2,620		—
Operating income	25,581		18,720		49,915		37,653
Interest expense, net	9,254		8,824		18,360		17,556

Other (income) expense, net	(24)		151		(150)		123
Total other expense, net	9,230		8,975		18,210		17,679
Pretax net income	16,351		9,745		31,705		19,974
Income tax expense	(885)		(192)		(1,212)		(640)
Net income	15,466		9,553		30,493		19,334
Net income attributable to non-controlling interest	144		85		264		167
Net income attributable to PetIQ, Inc.	$	15,322	$	9,468	$	30,229	$	19,167
Net income per share attributable to PetIQ, Inc. Class A common stock
Basic	$	0.52	$	0.32	$	1.03	$	0.66
Diluted	$	0.49	$	0.32	$	0.96	$	0.66
Weighted Average shares of Class A common stock outstanding
Basic	29,534		29,136		29,408		29,083
Diluted	34,940		29,373		34,949		29,218

See accompanying notes to the condensed consolidated financial statements.


PetIQ, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited, in 000’s)


	For the Three Months Ended				For the Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Net income	$	15,466	$	9,553	$	30,493	$	19,334
Foreign currency translation adjustment	(104)		287		(189)		236
Reclassification of foreign currency translation adjustment, realized upon sale	2,151		—		2,151		—
Comprehensive income	17,513		9,840		32,455		19,570
Comprehensive income attributable to non-controlling interest	401		87		520		169
Comprehensive income attributable to PetIQ, Inc.	$	17,112	$	9,753	$	31,935	$	19,401

See accompanying notes to the condensed consolidated financial statements.


PetIQ, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited, in 000’s)


	For the Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net income	$	30,493	$	19,334
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation and amortization of intangible assets and loan fees	15,834		19,769

Gain on disposition of property, plant, and equipment	(219)		—
Stock based compensation expense	5,401		5,208

Impairment and other asset charges	2,620		—
Other non-cash activity	2		(135)
Changes in assets and liabilities, net of business acquisition
Accounts receivable	(72,367)		(74,468)
Inventories	(5,797)		2,901
Other assets	1,568		(481)
Accounts payable	2,564		40,320
Accrued wages payable	(2,559)		252
Other accrued expenses	(4,806)		1,703
Net cash (used in) provided by operating activities	(27,266)		14,403
Cash flows from investing activities

SEC Form 10-Q filed by PetIQ Inc.