PetIQ, Inc. (NASDAQ: PETQ) reported Q4 EPS of ($0.41), $0.31 worse than the analyst estimate of ($0.10). Revenue for the quarter came in at $164.2 million versus the consensus estimate of $146.05 million.

Fourth Quarter 2020 Highlights Compared to Prior Year Period

• Net sales of $164.2 million compared to $154.3 million, an increase of 6.4%
• Product segment net sales of $145.1 million compared to $134.9 million, an increase of 7.5%
• Product adjusted EBITDA increased 44.8% to $24.8 million, representing an adjusted EBITDA margin of 17.1%, an increase of 440 basis points
• Services Segment net revenues of $19.2 million compared to $19.4 million, a decrease of 1.5%, reflecting a continuation of absenteeism related to COVID-19 illness, resulting in temporary clinic closures of 12% to 16% week-to-week
• Service segment net revenues increased nearly 60% compared to the third quarter of 2020
• 19 new wellness center openings in the fourth quarter of 2020, in-line with the Company’s stated objective of 126 wellness centers in operation at the end of 2020
• Net loss of $11.9 million compared to net loss of $13.8 million, primarily due to $5.1 million in additional interest, depreciation, and amortization expense related to the Capstar® acquisition
• Adjusted net loss of $2.5 million compared to adjusted net loss of $0.03 million, driven by the previously mentioned interest and depreciation and amortization
• Adjusted EBITDA of $13.0 million compared to $9.7 million, an increase of 33.9%

“We’re pleased with our strong finish to 2020. Our financial results were better than we expected for the fourth quarter, driven by robust growth in our Products segment, solid consolidated gross margin expansion and an improvement in our Services segment from the third quarter of 2020, even as we continued to experience clinic and wellness center temporary closures due to absenteeism from COVID-19 illnesses,” commented Cord Christensen, PetIQ’s Chairman & Chief Executive Officer. “The financial strength that our Products segment provides to our broader business is an important component of the resilient nature of PetIQ. We believe the three strategic acquisitions we have completed in the last three years have been highly complementary and position us well to further extend our ability to connect with more pet parents and their pets. Looking ahead, we’ve had a strong start to 2021 and expect our diversified business model will enable us to emerge from this period of disruption in an even stronger position with broader capabilities to bring convenient and affordable pet health and wellness products and services to pet parents in the formats that best fit their lives.”

Outlook

The Company expects to open 130 to 170 new wellness centers in 2021. While the Company’s outlook remains suspended due to the uncertainty from potential COVID-19 related impacts to its business, consistent with management commentary on its third quarter 2020 earnings conference call, it continues to maintain an internal budget of approximately $950 million in net sales and over $100 million in adjusted EBITDA, with the only significant variable to this plan, being absenteeism affecting the Company’s Services segment results. For the Products segment, the Company has strong visibility to another year of solid sales growth and Adjusted EBITDA margin expansion. The Company will continue to monitor its rate of Services segment absenteeism as the year progresses. As the Company’s Services segment reaches a steadier state with lower or minimal rates of absenteeism, it will then be in a better position to provide formal annual guidance.

The Company continues to expect full year 2021 incremental EBITDA contribution from Capstar® of greater than $20 million. Long-term, the Company remains confident in achieving its strategic and financial objectives.

For earnings history and earnings-related data on PetIQ, Inc. (PETQ) click here.