Executive Summary

PetIQ delivered record Q2 2024 net sales of $328.9M (+4.6% YoY) and record adjusted EBITDA of $39.0M, exceeding its guidance range ($34.0–$36.0M); GAAP diluted EPS was $0.49 (+53% YoY), adjusted EPS $0.70 (+52% YoY) .
Gross margin expanded 330 bps to 26.8% on mix shift to higher-margin manufactured brands and operational efficiencies; Services gross profit benefited from prior wellness center optimization .
The company announced a definitive agreement to be acquired by Bansk Group for $31.00 per share in cash, suspended its 2024 financial outlook, and cancelled the Q2 earnings call—shifting near-term stock drivers to M&A completion risk and timing .
Liquidity increased to $209.1M and net leverage improved to 3.0x (from 3.6x in Q1 2024 and 3.6x in Q2 2023), reflecting stronger earnings and working capital improvements .
S&P Global consensus estimates for Q2 2024 were unavailable due to a missing mapping (we attempted retrieval; none returned), so estimate comparisons are not provided [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

Record profitability: Adjusted EBITDA of $39.0M (+19% YoY) and adjusted EBITDA margin of 11.9% (+150 bps), above guidance; gross margin up 330 bps to 26.8% .
Manufactured products momentum: Net sales for manufactured products increased 15.7% YoY, driving margin expansion via favorable product/channel mix .
Segment execution: Product segment net sales +4.7% to $291.2M; Services +3.7% to $37.7M with stronger mobile clinics offsetting prior wellness center closures; Services optimization continued to underpin profitability .
Management tone: “Record financial results,” “profitability exceeded our expectations,” and confidence in long-term growth from marketing and operational initiatives (CEO) .

What Went Wrong

SG&A deleverage: SG&A rose to $60.1M (18.3% of sales, +80 bps YoY) and adjusted SG&A to $56.3M (17.1% of sales, +70 bps), largely from a planned ~$5M marketing step-up .
Non-recurring loss: Included $2.6M loss from sale of the Mark & Chappell foreign subsidiary on April 30, 2024 (Products segment) .
Outlook visibility removed: Company suspended its FY2024 financial outlook and cancelled the earnings call due to the merger announcement, reducing near-term visibility for investors .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Revenue ($USD Millions)	$314.5	$308.4	$328.9
Gross Profit ($USD Millions)	$73.9	$74.5	$88.3
Gross Margin (%)	23.5%	24.2%	26.8%
GAAP Net Income Attributable to PetIQ ($USD Millions)	$9.47	$14.91	$15.32
GAAP Diluted EPS ($)	$0.32	$0.48	$0.49
Adjusted Net Income ($USD Millions)	$13.40	$18.47	$22.73
Adjusted Diluted EPS ($)	$0.46	$0.58	$0.70
EBITDA ($USD Millions)	$29.21	$32.15	$32.67
EBITDA Margin (%)	9.3%	10.4%	9.9%
Adjusted EBITDA ($USD Millions)	$32.87	$35.27	$39.05
Adjusted EBITDA Margin (%)	10.4%	11.4%	11.9%

Segment Breakdown

Segment	Q2 2023	Q1 2024	Q2 2024
Products Net Sales ($USD Millions)	$278.17	$276.89	$291.20
Services Net Sales ($USD Millions)	$36.38	$31.55	$37.74
Services Same-Store Sales ($USD Millions)	$33.63	$30.97	$37.28
Services Non Same-Store Sales ($USD Millions)	$2.75	$0.58	$0.46

KPIs and Balance Sheet

Metric	Q4 2023	Q1 2024	Q2 2024
Cash and Equivalents ($USD Millions)	$116.37	$25.37	$84.13
Total Debt ($USD Millions)	$445.23	$443.90	$442.55
Total Liquidity ($USD Millions)	$241.40	$150.40	$209.10
Net Leverage (x)	2.9x	3.6x	3.0x
SG&A as % of Sales (%)	19.4%	16.3%	18.3%
Diluted Share Count (Millions)	29.19	34.78	34.94

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($USD Millions)	Q2 2024	$325.0–$335.0	Actual: $328.9	In-line
Adjusted EBITDA ($USD Millions)	Q2 2024	$34.0–$36.0	Actual: $39.0	Beat
Net Sales ($USD Millions)	FY 2024	$1,135.0–$1,185.0	Suspended	Withdrawn
Adjusted EBITDA ($USD Millions)	FY 2024	$112.0–$117.0	Suspended	Withdrawn

Notes: Company cancelled the Q2 earnings call and suspended the FY2024 outlook concurrent with announcing the merger agreement .

Earnings Call Themes & Trends

There was no Q2 2024 earnings call transcript; themes reflect Q2 press release plus prior Q4’23 and Q1’24 calls.

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
Marketing investments	Step-up of $12M in 2024; front-loaded (~$10M 1H); strong ROI; building brand awareness; highest adj. EBITDA margin despite spend	Planned ~$5M incremental Q2 marketing; SG&A up; margin expansion persisted	Continuing; disciplined, ROI-focused
Services optimization	Closed 149 wellness centers; margin drag in Q4 but set up for improvement; mobile clinics expansion; vet staffing recovery	Services net sales +3.7% YoY; mobile clinics offset closures; optimization supports margins	Improving operations; stable growth
Flea & tick seasonality	2023 unusually strong; 2024 modeled average; early 2024 reading “5–6” out of 10; category up 4–5%	Category mix favorable; manufactured brands drove growth and margin	Healthy; supportive to topline/margins
Manufactured brands share	OTC flea & tick share gains; supplements/dental treats strong; VetIQ/Minties/Pur Luv traction; Rocco & Roxie expansion	Manufactured products +15.7% YoY; favorable mix boosted gross margin	Strengthening share and mix
Inventory/working capital	Seasonal build raised Q1 inventory; expected normalization mid-2024	Working capital improvements aided net leverage; cash up QoQ	Normalizing; leverage improving
Leverage/liquidity	FY23 net leverage record low 2.9x; Q1 seasonally high 3.6x	Net leverage 3.0x; liquidity $209.1M	Improved vs Q1
Convertible notes EPS methodology	If-converted method increases diluted shares ~4.8M in certain quarters (modelling note)	Diluted shares 34.9M; company reiterates intention not to settle notes in stock	Ongoing EPS dynamic
M&A	Discussed disciplined M&A approach; Rocco & Roxie success; potential future deals	Definitive agreement to be acquired by Bansk Group for $31.00/share; FY24 outlook suspended	Transformational event; shifts focus

Management Commentary

“We are very pleased to report another quarter of record financial results. The strength of PetIQ's brands fueled second quarter profitability that exceeded our expectations… strategic marketing investments and operational initiatives… delivering results and we expect them to support our long-term growth and success.” — Cord (McCord) Christensen, Founder & CEO .
“Adjusted EBITDA… above the Company's guidance of $34.0 million to $36.0 million… Gross margin increased 330 basis points to 26.8%… primarily from an increase in sales of… higher margin manufactured products… operational efficiencies… Services segment optimization.” — Company release .
“PetIQ… will be acquired by Bansk Group for $31.00 per share… all-cash transaction expected to close in the fourth quarter of 2024… PetIQ has suspended its 2024 financial outlook and will no longer host its earnings conference call and webcast.” — Company release .
EPS methodology reminder: Diluted share count higher under ASC 260 “if-converted” treatment for convertible notes; company does not intend to settle notes with equity .

Q&A Highlights

There was no Q2 earnings call; highlights below reflect the most recent Q1 2024 Q&A:

Gross margin sustainability: Gains driven by manufactured mix and operational efficiency; management increased full-year margin improvement expectation to “75 bps+” versus prior 50 bps .
Marketing cadence and ROI: ~$12M incremental 2024 spend, front-loaded; focus on brand building with measured returns; spending can be flexed if ROI ceilings emerge .
Category health and consumer behavior: Pet health spend resilient; manufactured brands gaining share without cannibalization; new and lapsed customers re-entering categories .
Flea & tick season: Early read slightly favorable vs plan; category growth 4–5% vs modeled ~3%; supported Q2 setup .
Services labor and operations: Vet population healthy (~3,500 in mobile community clinics); cancellations back to 2019 lows; optimization driving margin gains .

Estimates Context

We attempted to retrieve S&P Global/Capital IQ consensus for Q2 2024 EPS and revenue; estimates were unavailable due to missing CIQ mapping for PETQ, so no estimate comparisons can be provided at this time [GetEstimates error].

Where estimates may need to adjust: Given actual adjusted EBITDA materially above company guidance and gross margin expansion, consensus models (once available) may need to reflect higher mix-driven margins and stronger manufactured brand performance; however, FY2024 guidance has been suspended due to the announced acquisition, limiting forward visibility .

Key Takeaways for Investors

Operational beat: Adjusted EBITDA and margin exceeded guidance on manufactured product strength and efficiencies; SG&A up as expected from marketing investments, but margin expansion absorbed the spend .
Mix-led margin tailwind: Favorable product/channel mix and Services optimization drove 330 bps gross margin expansion; this mix dynamic remains central to the thesis .
Liquidity and leverage improved: Liquidity rose to $209.1M and net leverage fell to 3.0x, reflecting stronger earnings and working capital execution .
M&A is now the primary catalyst: The $31.00/share all-cash takeout by Bansk Group refocuses near-term outcomes on deal approval/closing; company withdrew FY2024 outlook and cancelled the call .
EPS modeling nuance: Diluted share count elevated under if-converted methodology; management reiterates no intent to settle convertible notes with equity—important for EPS comparability across quarters .
Segment balance: Product segment remains the growth engine; Services performance stabilizing via mobile clinics; continued contribution expected from optimization .
Trading implications: Near-term stock path driven by the merger-arb spread rather than fundamentals; fundamental outperformance supports deal valuation and sets a constructive baseline if any process changes arise pre-close (note: no guidance until transaction closes) .

PetIQ, Inc. (PETQ)·Q2 2024 Earnings Summary