{ "docId": "019dd923-622c-750b-8b98-a3d302cd2d9a", "docSlug": "2692179b6d0b", "documentTitle": "PetIQ, Inc. (PETQ)", "authorId": "54_Spruce_Point_Capital", "authorName": null, "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-04-30 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 62, "pageCount": 96, "prevPage": 61, "nextPage": 63, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "Uses a side-by-side comparison of quotes to expose management inconsistency.", "elementsJson": [ "headline_text", "paragraph", "callout_box", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-a3d302cd2d9a/62", "deckHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a#slide-62", "components": [ { "bbox": null, "kind": "callout", "text": "We find it concerning that management would make such a weakly supported claim, and that it wasn't even planning on discussing the change in maturity estimate until questioned about it.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-ee3c-76df-965f-9170fcd3c893", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.4, "x": 0.55, "y": 0.33 }, "kind": "list", "text": "Management Walking Back FY19 Store Opening Estimate", "attrs": null, "subkind": "comparison", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8cad62b6-a751-4713-b393-34a824dd18de", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.45, "x": 0.05, "y": 0.33 }, "kind": "list", "text": "Management Walking Back Wellness Center Maturation Schedule", "attrs": null, "subkind": "comparison", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b822142f-2437-484b-b32c-698d525e1803", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.16 }, "kind": "paragraph", "text": "Management language suggests that it is losing confidence in the initial targets set for new wellness centers. On its Apr 2018 business update call, the Company communicated that new wellness centers would reach maturity within about a year, but that they could take “upwards of 18 months” “in a slow environment.” Six months later, on the Q3 FY18 earnings call, management changed its new store earnings add-back to include stores open for 18 months or less - up from 12 months. When asked about the change, management claimed that it had “been messaging all along” that “the maturity model is 18 months.” We find it concerning that management would make such a weakly supported claim, and that it wasn’t even planning on discussing the change in maturity estimate until questioned about it.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9d340fb2-8f39-4eca-8251-25a8db03b5ac", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.4, "x": 0.1, "y": 0.75 }, "kind": "quote", "text": "Yes. Brian, this is John. That's a great question and thanks for bringing it up. We looked at ourselves internally, and we said, we've been messaging all along that the maturity model on our clinic whether it's our new wellness center or when we enter into new markets or with new retail partners, the maturity model is 18 months. So, therefore when we evaluate the same-store sales add-back it should be looking at the exact same way. - John Newland - CFO, PetIQ", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "39e607ea-be8d-4597-b514-13880534e382", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.45, "x": 0.05, "y": 0.6 }, "kind": "quote", "text": "PETQ Earnings Call: Q3 FY18. This is kind of mechanical in nature, but if I am looking at the way you discussed adjusted net income and excluding, I guess the clinics primarily, before you were using clinics have been open or now opened for a year, now that's shifted to what seems to be 18 months. Why that shift? - Brian Nagel - Oppenheimer & Co.", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8f9be641-68cc-4f97-9fd5-233608d09655", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.4, "x": 0.55, "y": 0.65 }, "kind": "quote", "text": "PETQ Earnings Call: Q4 FY18. As Cord mentioned, we expect [to] open more than 80 new wellness centers in 2019 beginning in Q2 with a vast majority of wellness centers opening weighted towards the second half of 2019. - John Newland - CFO, PetIQ", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d12b1152-dec2-4736-9cd8-ea3f7ff8ddf3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.4, "x": 0.55, "y": 0.38 }, "kind": "quote", "text": "PETQ Financial Modeling Call: Apr 2, 2018. If you look at the right side of this chart, this shows the clinic rollout schedule as we've organized ourselves internally. For 2018, we believe we'll open between 20 and 30 locations; 2019, 80 to 120; and you can see the schedule out through 2023 to be able to have over 1,000 locations operating by the end of 2023. - McCord Christensen - CEO, PetIQ", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d2435f4d-de25-490f-aba5-623e9ceb42b7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.45, "x": 0.05, "y": 0.38 }, "kind": "quote", "text": "PETQ Financial Modeling Call: Apr 2, 2018. Ultimately, we think that a typical point that we run will mature to a point where it's got a very, very solid consistent number of pets that'll treat on a weekly basis, and we're estimating that it takes roughly a little over a year to get to that point. And in a slow environment, it could take upwards of 18 months to get there. - McCord Christensen - CEO, PetIQ", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "faf9dd68-8548-4934-a9a1-6f7d1bb83bec", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"Ultimately, we think that a typical point that we run will mature to a point where it's got a very, very solid consistent number of pets that'll treat on a weekly basis, and we're estimating that it takes roughly a little over a year to get to that point. And in a slow environment, it could take upwards of 18 months to get there.\" — McCord Christensen, CEO, PetIQ; \"If you look at the right side of this chart, this shows the clinic rollout schedule as we've organized ourselves internally. For 2018, we believe we'll open between 20 and 30 locations; 2019, 80 to 120; and you can see the schedule out through 2023 to be able to have over 1,000 locations operating by the end of 2023.\" — McCord Christensen, CEO, PetIQ; \"This is kind of mechanical in nature, but if I am looking at the way you discussed adjusted net income and excluding, I guess the clinics primarily, before you were using clinics have been open or now opened for a year, now that's shifted to what seems to be 18 months. Why that shift?\" — Brian Nagel, Oppenheimer & Co.; \"Yes. Brian, this is John. That's a great question and thanks for bringing it up. We looked at ourselves internally, and we said, we've been messaging all along that the maturity model on our clinic whether it's our new wellness center or when we enter into new markets or with new retail partners, the maturity model is 18 months. So, therefore when we evaluate the same-store sales add-back it should be looking at the exact same way.\" — John Newland, CFO, PetIQ; \"As Cord mentioned, we expect [to] open more than 80 new wellness centers in 2019 beginning in Q2 with a vast majority of wellness centers opening weighted towards the second half of 2019.\" — John Newland, CFO, PetIQ", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-ee3c-76df-965f-97b66af427f9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.68, "x": 0.28, "y": 0.03 }, "kind": "title", "text": "Is Management Already Walking Back Its Expectations For The Wellness Center Rollout?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fec8eab0-8244-4d13-bdfc-8d5a00d41ad9", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "38448e94-3359-444b-90a0-546c5412df29", "evidence": "Contrasting CEO/CFO statements across different earnings calls to highlight inconsistency.", "confidence": 0.9 } ], "arcBeats": [ { "to": 95, "from": 6, "beatId": "96b19703-73d7-4b02-a51b-72443d554cee", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Expose Contradiction", "beatSlug": null, "evidence": "Detailed critique of PetIQ's business practices, financials, and valuation", "position": 1, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }