{
  "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": 95,
  "pageCount": 96,
  "prevPage": 94,
  "nextPage": 96,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "dense",
  "nDataPoints": 24,
  "notes": "The slide highlights the discrepancy between management's reported metrics and the analyst's adjusted metrics, specifically focusing on the treatment of wellness center startup costs.",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "valuation_table",
    "callout_box"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b98-a3d302cd2d9a/95",
  "deckHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-a3d302cd2d9a#slide-95",
  "components": [
    {
      "bbox": {
        "h": 0.08,
        "w": 0.9,
        "x": 0.05,
        "y": 0.87
      },
      "kind": "callout",
      "text": "Note that the magnitude of management's EBITDA adjustments will only grow over time. In particular, with new wellness center openings set to reach 200-300 per year in FY21-23, and with each new wellness center incurring one-time opening expenses of $70K, new clinic launch expenses could approach $15-20M within 3-5 years.",
      "attrs": null,
      "subkind": "primary",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "660a4211-2120-46db-a68c-acb2b9404670",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "callout",
      "text": "Note that the magnitude of management’s EBITDA adjustments will only grow over time. In particular, with new wellness center openings set to reach 200-300 per year in FY21-23, with each new wellness center incurring one-time opening expenses of $70K, new clinic launch expenses could approach $15-20M within 3-5 years.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd952-ee3d-779f-8248-4be2d9e7f084",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "EV/EBITDA: 82.1x",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd952-ee3d-779f-8248-4cb5d7b4d039",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.9,
        "x": 0.05,
        "y": 0.16
      },
      "kind": "paragraph",
      "text": "Even as PetIQ shares trade at a dramatic premium to peers in both the pharmaceutical distributor space and pet care space, Company adjustments to earnings and EBITDA give the stock the appearance of being valued less expensively than it would be valued on a more reasonable definition of earnings. Management adjusts both EBITDA and net income for expenses related to the launch of its new wellness centers, and costs associated with centers <18 months old. Spruce Point has never seen a company adjust for such items and strongly believes that they should not be adjusted out of earnings: wellness center startup costs and losses from immature stores represent necessary implementation costs of PetIQ's growth strategy and, as such, cannot be ignored.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "c27cf4d2-69b6-455b-9817-057aaef4c5d9",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.42,
        "w": 0.42,
        "x": 0.08,
        "y": 0.37
      },
      "kind": "table",
      "text": "EBITDA Adjustments table showing management vs Spruce Point definitions for FY18.",
      "attrs": null,
      "subkind": "data",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "32566864-6b62-4a8e-aba7-8ec275bf853e",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.42,
        "w": 0.42,
        "x": 0.51,
        "y": 0.37
      },
      "kind": "table",
      "text": "Earnings Adjustments table showing management vs Spruce Point definitions for FY18.",
      "attrs": null,
      "subkind": "data",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "fee5d167-fddd-46a0-8088-4c1df8d605ac",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.08,
        "w": 0.68,
        "x": 0.28,
        "y": 0.03
      },
      "kind": "title",
      "text": "Aggressive Earnings Adjustments Artificially Deflate Valuation Multiples",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "65c03468-646b-4e04-b115-4bd690269271",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [
    {
      "name": "fraud-exposure",
      "slug": null,
      "matchId": "6ed4acf6-9d12-4bf6-b952-d1db38cf4336",
      "evidence": "The slide explicitly argues that management is using aggressive accounting adjustments to mislead investors about valuation.",
      "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
}