PETS - Earnings call transcript Q2 2019

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Operator

Welcome to the PetMed Express Inc. doing business as 1-800-PetMeds Conference Call to review the financial results for the Second Fiscal Quarter ended last September 30, 2019. At the request of the company, this conference call is being recorded. Founded in 1996, 1-800-PetMeds is America’s largest pet pharmacy, delivering prescription and non-prescription pet medications and other health products for dogs and cats, direct to the consumer. 1-800-PetMeds markets its products through national advertising campaigns, which direct consumers to order by phone or in the Internet and aim to increase the recognition of the PetMeds family of brand names. alternative ease pet home of attractive of in delivery. an price, convenience, ordering provides for medications obtaining terms X-XXX-PetMeds and rapid

over At turn Financial would I Mr. to call Officer, this Chief the Rosenbloom. like Bruce company’s time, the to

may You begin.

Bruce Rosenbloom

like I everybody welcome would here Thank to you. today.

question-and-answer President this listen-only to Before that remind the our the to which conference Officer, be Executive session first Menderes over turn Chief later the I call. of call be everyone until will I Akdag, portion in call and will would like the

these results, a press these these as that may meaning These uncertainties. Also and views be us. that current assumptions upon materially Litigation or statements that from well certain may of to information our based available factors number future will are Private statements based involve and the forward-looking included Reform our we the Actual achievements of cause on in within risks assumptions. Securities involve beliefs this or of currently statements significantly, expressed used a results may number future actual to as or Because be XXXX information or by Commission events based the reflect different conference results and statements Act have on Securities vary include events, performance Exchange of risks, the implied future concerning uncertainties statements. may

Commission. operations with our with Report associated We recent factors Securities other our on the have various Exchange identified risk filings and most and Annual

Mendo? Mendo Executive introduce and of Now, X-XXX-PetMeds. Chief speaker today’s President the me let Akdag, Officer

Mendo Akdag

us. for Welcome Bruce. you you, Thank thank joining and

pricing major we report in relationships all the minimum with have we start price manufacturers a the we market. review Before these and direct results, general our allowing financial policies now manufacturers advertised have discipline are to pleased that of the

will on ended quarter year’s September XXXX. we months September XXXX and ended X fiscal months quarter X on our and to XX, compare second Now, XX, last

XXXX, of a XX, million our million September same year, on to $XX.X ended the quarter fiscal for decrease compared $XX.X X%. sales prior second the For were the period

September reorder forced $XXX.X the by in sales year, for online offset increases decreases and negatively X were impacted the new months were of compared order months. decreases in in in were The due for on months on $XXX.X reorder us ended For new for X to sales to the prices. XX, increases the reduce sales competition X.X%. both quarter to pricing market and the sales prior Sales that increased a million the XXXX, by aggressive decrease million sales and X

manufacturers As value should market. discipline approximately year. decrease average $XX I minimum for the order bring pricing was in just reductions. the due to the was mentioned, period price the quarter The compared policies The to for advertised the same $XX into last price general

to net second year, compared months, the $X.XX a share per a ago, of $X.XX share net XX%. to per million fiscal $X.X for was diluted year million income $X.XX diluted prior to $XX or decrease diluted million or per earnings per the $XX.X for or X For the was quarter, per XX%. $X.XX $XX.X of share share quarter the earnings of million diluted same or diluted income share And diluted share to a decrease compared per

due mainly the to attributable addition were to In to income reductions. in gross to sales, price decreases net margins lower decreases profit

sales compared to points basis increased the for reorder prior improved by to XXX in sales $XX.X September million quarter million for quarter. $XX compared the sequentially quarter the the year. the quarter Reorder X.X% margins of same to Operating by June of

period for million compared by year. decreased $XXX.X to months, X same the the X.X% For sales last $XXX.X million the reorder to

same period to to $XX.X New million quarter the XX% prior for million order the $X.X compared by for sales year. decreased the

XXX,XXX sales second order We by X are customers seasonality business quarter ago. in tick, being the same XXX,XXX new million proportion our the X million the decreased and the due approximately we customers The compared months and season for period mix. in last compared for acquired season. period period to year the year. peak new to with months, Spring $XX.X approximately fiscal the product new acquired of in off winter to the medications is XX,XXX XX% prior year the $XX.X to same our and a flee, heartworm compared and For fall for to the in summer our same XXX,XXX considered

year basis to attributed decreases The XX.X% compared margin quarter June same was compared For be the XX.X% percentage period a online the same can quarter. XX.X% gross percent to a in sales September improved XXX points the to for reductions in price the months, competition. percent to response compared the to our the X ago. sequentially year. of was mainly fiscal the increased Gross prior sales a for our for profit profit period as second of XX.X% as gross quarter, And

As our in help with margins I which the beginning, have relationships improve gross major may the mentioned future. we now manufacturers the in direct all

$XXX,XXX General the administrative year. compared and expenses quarter last were to same up about

we of due in elimination the of the For the million in $X.X $X.X spent The television advertising a quarter, for the same was XX%. quarter to prior advertising decrease the million year, to compared quarter. decrease

of year, the The acquiring compared last X months was was last of the the advertising same the million to million compared the cash million with quarter. increase was year. September million period in to months for XX, debt in We $XX.X months year. re-addition X $XX $XX.X we and $XX quarter increases for the operations cash compared cash environment. in XXXX. television approximately customer the X $XX inventory in the $XX was related months The had in a from the $XX months advertising for million The X for costs to competitive the $XX.X ago, XX%. to months, no and of of million as and for X advertising the were the cost spent to year June prior to more same compared quarter the for due $XX.X increases of Net it a equivalents, due increase For for advertising to $XX.X an X for

This financial are Operator, review. questions. ends the take to we ready

Operator

Certainly.

first begin now session. Instructions] from Credit will [Operator question-and-answer question Erin the We is Our Wright of Suisse.

Your line open. is

Erin Wright

in out to being Hi, could curious sales activity? pricing MAP to Thanks. than obviously what is speak more extent, and thanks. I that if under expectations? the am of MAP some then your percentage the said that’s percentage pricing -- terms playing and margin promotional and you profile, of obviously Is you you consider overall out your how flexible shaking how expected are the pricing higher to what implemented relative would

Mendo Akdag

pricing. our than MAP pricing is on higher than – are an average higher prior

Erin Wright

And percent those you would are of pricing strategies? what under of sort sales say your MAP

Mendo Akdag

Majority of them.

Erin Wright

sort competitive strategies just great. there? the we Okay, in and strategy particularly how the for where of now campaign, year am the an marketing your Thanks. you with the spend thinking on remainder you be should head on advertising cycle? of And stand latest do in TV I as thoughts I about into then election the you of speak curious for the to can guess, landscape advertising light your we spot advertising

Mendo Akdag

we than in about is the XX% year. prior spent what higher budget our Well,

to for will more are with efficient next our minimal likely Television to on is and year. spending going – our optimizing We advertising advertising be be working advertising intend be the spending, we

Erin Wright

you. Okay, great. Thank

Mendo Akdag

You are welcome.

Operator

Thank you.

is next question Craig-Hallum. Kevin Our from from Ellich

line is open. Your

Kevin Ellich

in that said Good the go Thanks. that direct Zoetis you have did so did happen? did morning. major manufacturers, with contract, morning now when this relationships effect Mendo, you or all actually the that just

Mendo Akdag

month. This

Kevin Ellich

me? Excuse

Mendo Akdag

October. in month, This

Kevin Ellich

it. got it, Got

And MAP of the think clearly, will you I of or Okay, great, improve do ramp from here? you we gross do – us – help then guess we saw gross great. can should with improvement continue sequentially nice profit you I how forward mean give sequentially any a see move in kind margin, think terms to in

Mendo Akdag

We anticipate to improve that from September the quarter. going it’s

I we quarters. the in a picture have think will couple next better of

Kevin Ellich

Got or a box deals, it, on update maybe like okay. label white Any Got Target Costco? potential with big retailer it.

Mendo Akdag

have do anything We not pending.

Kevin Ellich

any in discussions? Are pending? Nothing you

Mendo Akdag

Yes.

Kevin Ellich

the manufacturers? then kind the your inventory clearly given balance is sheet And sequentially, we levels down thinking and about direct the Okay. from should be of this purchasing

Mendo Akdag

opportunity, a will cost When buying inventories. we is there carry higher advantage

depend. will it So,

Kevin Ellich

tax That might have have it sense. rate? tax Bruce, we rate And a quickly it than really looks looked if bump bit been but was makes like little it up have Okay, wondering, like higher remodeling major, – just was been would got were on like it. what would the expecting, nothing XX% $X.XX,

Bruce Rosenbloom

Right.

change a we a On in had last in $XXX,XXX And vest. past, stock of was the benefit quarter, a the X reconcile we had what X is in compensation the charge the stock when rate, windfall restricted or have we our every because years which do have September quarter. price, tax they the actually actually for called to of

quarter, So July again, our restricted going forward every be stock these vesting. probably September when and in shares, vest restricted that’s all they will of

we so, will be on when were benefit shares change the in It from could of or when charge a stock this issued charge. the depending have And they the could type be a it versus vest. price

Kevin Ellich

the implemented? expecting And Got the a can prescription more major it. market? MAP you to you That bit now competition, into is about little makes retailers a jump talk then then competitive other And lot of lastly sense. online landscape any Mendo, that pet are

Mendo Akdag

as the far are market are with as – entering we that as – aware they prices anybody market. are are And not on manufacturers enforcing of Prices we planning else, have policies. mean doesn’t in not the but MAP said, stabilizing

Kevin Ellich

Thanks Great. guys.

Operator

Instructions] Sidoti next Anthony you. from Thank Company. from Our Lebiedzinski question [Operator is &

line open. Your is

Anthony Lebiedzinski

for taking good Yes, the you questions. and thank morning

the noticeable that wondering manufacturer months? comment from you was And the going just it selling during and perhaps just be as if of perhaps on margins manufacturer? could the was the you I far between percentage there get as the of of is you first, sales or to was change wondering kind sales steady last directly, that now comment So, gross progression if could quarter, on that

Mendo Akdag

are to not we comment we Yes, are reporting. get going going not to that, month we to on month into and are – not

Anthony Lebiedzinski

so digital your then safe That’s at only to Okay, this to fair. got is assume it. point? And advertising far it be as going it’s as strategy,

Mendo Akdag

to Much Majority digital. is going more be digital, yes.

Anthony Lebiedzinski

Right, okay.

elimination the of is basically, safe it So your because efficient perspective, was say? from was that to not TV advertising cost

Mendo Akdag

yes. correct, is That

Anthony Lebiedzinski

to and you Alright. comment like overall for Got capital anything allocation dividends, on? buybacks it. there would your priorities outlook And between just

Mendo Akdag

We normal else We at don’t during time. this course do at acquisition look of have business. anything opportunities

Anthony Lebiedzinski

what’s website that get you And looking and do the your Got it, far lastly to do cost as improvements like that – project? expect what’s of as out to what kind that and okay. e-commerce with that you associated on of the timing are what’s

Mendo Akdag

becomes that cost and -- stabilizing of is of end of the experience, It’s the is before critical use, improve personalization, platform to about prices user year, the be with it we more speed, the ease on purpose $X especially The million. anticipate to the to is goal. due

Anthony Lebiedzinski

Got end clarify calendar And end the or then fiscal that to just the of is year? it, okay. the of year

Mendo Akdag

year. of End calendar the

Anthony Lebiedzinski

Thanks it. Got and Alright. of best luck.

Mendo Akdag

you. Thank

Operator

you. Thank

Our next Ellich from Craig-Hallum. question is from Kevin

line Your open. is

Kevin Ellich

but have talked of guys or that sales reorder one And give of you just release, genesis talked follow-up. was? you are little about does on I the wondering program, a mean really the Mendo, this I you about guess of that program? us in I can what detail just the kind press guys behind don’t you rewards bit And really focused think this, PetMeds

Mendo Akdag

the retention to returns, Ask Then Vet, there etcetera. Objective free such and higher increase the also articles other benefits customer additional purchases discounts. educational with treats, free it are with as rewards customers is

Kevin Ellich

it. Got

good. Okay. Thank It sounds you.

Mendo Akdag

welcome. You’re

Operator

Akdag, At may are there this proceed. Mr. further you questions. no time,

Mendo Akdag

Thank you.

more of this fiscal our focus be to advertising with marketing continue price spending. efficient more competitive will and our remainder in will the environment XXXX, on optimizing being and we For competitive

the In up joining addition, our service this platform This investing we Operator, today’s have conference conference Thank been customers. us. you ends to call. wraps better call. e-commerce in our for

Operator

participating. for Thank you

You may disconnect.

PetMed Express (PETS) 21 Oct 192019 Q2 Earnings call transcript