PETS - Earnings call transcript Q2 2020

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Operator

Good morning. Welcome to the PetMed Express Incorporated, doing business as 1-800-PET-MEDS, conference call to review the financial results for the second fiscal quarter for the quarter ended on September 30, 2020.

As per request of the company, this conference call is being recorded. Founded in 1996, 1-800-PET-MEDS is America’s most trusted pet pharmacy, delivering prescription and non-prescription pet medications and other health products for dogs, cats and horses direct to the consumer. 1-800-PET-MEDS market is product to national advertising campaigns which direct consumers to order by phone or on 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-PET-MEDS and rapid over At turn Financial would I Mr. to call Officer, this Chief the like company’s time, the to Bruce Rosenbloom.

Bruce Rosenbloom

risks, a These statements beliefs involve the as information vary may based current that risks used that assumptions. these results, future based a of these call in expressed certain like everybody implied Actual uncertainties, and to in the be will involve XXXX future attend you. will the achievements include or significantly due conference the today. call. session, Securities events currently answer factors actual of results by Securities this question this included Akdag, our meaning future concerning views President on may our may of based Private upon morning’s to Thank be Officer first Executive statements. materially listen-only of the would available Menderes uncertainties. Exchange us. and as we number or Unfortunately until and matter, Litigation conference here forward-looking are have Chief which will may to of Because results number to personal the the Act from statements different this is be information later and would press and reflect on assumptions that like our cause conference or Also, within I statements portion remind be welcome call. everyone a unable these that to I Commission, to performance events, Reform well or statements

Exchange annual continuing in healthy. with hope Thank various is risk we everyone Commission. the report and you to identified Securities most recent and stay have associated our joining for and other filings with us, and We operations factors our safe

and clinics of quarter. pet opening due settled stocked brick up to retailers a having September and June vet quarter, down demand consumer the the consumers and During combination mortar in up

during to our operations. business been without have normal any open hours We our material disruptions

We not of in our allowing disinfection Also, employees chain; and distancing from and some are and work disruptions home them still the with any items. health major the workplace. of in continuing we by possible where measures enhanced the ensure however, taking safety have our moving social to slow seen medium the dedicated have supply to in delivery delays experienced we inventory to

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

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

the XXXX, increases to and same the for and average order sales order was for The the reorder year, for $XX months the XX, increases for the increase quarter sales XX.X%. six prior months $XXX.X quarter last The million period in months. were reorder of six $XX compared the For the September value sales for approximately both year. new $XXX.X six due ended for sales to in were compared million increases on an to

for million the months the $XX same for For compared $XX.X or XX%, compared to increased for $X.X of $XX.X reorder and million net to net to income year, the $X.XX for Reorder million to to sales of second income XX.X% $X.XX net sales million a $X.X period net months or $X.XX the ago, XX%. the the $XX.X income reorder million share compared diluted increased prior to per X.X% same an increase $X.XX compared same by last quarter $XXX.X sales fiscal or for per or diluted and the per year to by income million the diluted the quarter, diluted million per was was quarter for million increase share, six year, share share to an quarter year. six $XXX.X of prior

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

of quarter to price shifted manufacturers, to mix minimum Also, expenses were direct same September six and the with XX.X% compared margin months. prior due year to quarter policies. the percentage the period to a X% six period June For major by gross as advertised improved percentage quarter for the having product relationships of of our The administrative ago. for the General percentage the September the have the these quarter, XX.X% a second year. gross to sales year, fiscal increases XX.X% and was the by was as last profit our quarter the compared months and XX% of XXX points higher basis manufacturers XXX and margins sales our same were a the Gross during all basis for medications for sales benefit profit a the prescription compared both for as same points for and quarter.

million of spent X%. prior we the $X.X for quarter, $X.X increase the million quarter the advertising compared For in year, an to same

six a and cost for For was months the was we in million months costs. The for in cash September million six approximately quarter to customer prior advertising quarter we operations acquiring million and Net last with months quarter an the had $XX.X $XX $XX for for to year, $XX for $XX.X to as We six the last due year. compared month compared XX, the cash six ends to X%. million $XX the the to the from period $XX.X XXXX. questions. of in no for the take cash six $XXX.X ready of million increases ago, compared for increase This the The same the months, a year. inventory equivalents debt compared of in $XX.X Operator, to for advertising spent and was same year was increase $XX.X financial advertising million review. the are

Operator

Eric Our from Suisse. question first Wright with is Credit instructions] [Operator

is open. line Your

Erin Wright

Great, profile it thanks. here, given us prescription and versus meaningfully mix can medications pricing the profit of What’s MAP versus this your strategy remind date? particularly has prescription, of OTC over-the-counter that been now? to you Has implemented changed

Bruce Rosenbloom

Sure thing.

mix, OTC, the the a margin products. was did increase and obviously uptick see normalized saw of quarter we mix. was The bit our in in higher a an call in prescription uncharacteristic the If we mentioned have than quarter, more although increase. a It a more September as an June remember you of a different OTC Rx from medications previously, normal profile bit of we over OTC,

Erin Wright

in Would that over you half of-- now is terms say prescription

Bruce Rosenbloom

total our half Over of sales?

Erin Wright

Yes.

Bruce Rosenbloom

definitely. half. Much more than yes, Oh

Erin Wright

of how year Okay, some just to new of curious over of growth online of a be great. COVID-driven customer you’re what that base. balance stickiness much stockpiling the in should Then versus COVID? seeing the there thinking base, of the customer shift the I’m we paradigm on given COVID-driven customer about terms how and

Bruce Rosenbloom

Right.

on also the with down search settled sales the has may have in stocking September new of have negatively which pet our might demand new you website the June and as mortar Also, we up quarter, platform the and brick overall the up, saw our know, a and impacted negative clinics quarter. had opening temporary in order term combination short quarter. You consumers and mentioned, vet our in during what natural effect stores

We second platform. of now ecommerce in are the phase our

mobile now new improve experience, are the digital on which customers’ in future. conversion redesigning website our to We optimize and app should focusing our customer our

just right our Obviously unknown seeing as in those As trends really majority so states cases that--how we’ll we’re the to how affect far increasing now. of the have U.S., in overall it’s COVID, business. a overall an see

see of take with and demand those but seen settle we’ve may the overall reorders of we that did new our also in be months down because clinics the fiscal retail become first increased right the able it the and opening to of customers stores, year. were now, six As of strong, extremely we for

Erin Wright

you. Thank great. Okay,

Operator

question. your for you Thank

Sidoti question is Lebiedzinski from next with & Company. Anthony Our

Your line is sir. open,

Anthony Lebiedzinski

June quarter. much like I maybe forward Yes, June the for you now the fiscal way thanks half that try could good there of you into taking sounds guess the quantify year, forward was--it mentioned saw you how my question, Bruce, morning you pull the the of quarter? first to back in and demand some looking at questions. think possibly Any first pulled

Bruce Rosenbloom

don’t like quantify we website, our usually information. internally. that ecommerce out do We platform, mentioned, well, to impacted that give have so that were really know that, We at may to number of in that so our few estimate, we a there’s prepared we also--as first it’s is not number new as Again, what with time. assumptions phase the negatively have give we’re reorders but an this involved to

Anthony Lebiedzinski

that’s enough. Okay, fair

have the when the website to as expect that far phase second improvement, As you of do completed?

Bruce Rosenbloom

we so quarter, should the mobile end launched is fully the date of with the during target hopefully app. redesign be and Our the of year third both by also the website this

Anthony Lebiedzinski

of spending advertising Then was you’ve in okay. costs else because going had being on? the up. something the the increases because of mentioned in know ad election. Was that, in it, or past increase Got there spending you I

Bruce Rosenbloom

search. keyword think overall of with more small strong. costs That’s majority have peak did spend. increase We online effect, saw be a key as word with was Advertising probably to online increased competition vet I of more during increases well. aggressive during it a and the normalized when our we’ll quarter. is overall attempt the our demand but in increased searches always competition season the also clinics But It

flexible return spending we ad budget, know, also on investment. to the have and you advertising is As a going

Anthony Lebiedzinski

in the on - gross think we Last should as about me you moving margins offseason, the year, from basis the further as back in that With the higher guys or second now gross half sequential of half gross fiscal expect sequentially. margin the improvement nice a in Got are so in you’re should had you question the year-over-year how that of typically it, the for mind, that? improvement margin, into we okay. well off-peak a

Bruce Rosenbloom

We don’t margins quarter. quarter to manage the

and also pricing as If there’s because want players As more we’re prescription competitive to ahead MAP that’s right year-over-year we we OTC that with you annualized course to opportunity competitive to and you’re and expect historically but during how Annually, margins as it opportunity we trends far space also of an see over modest we margins, that look offseason, an periods. a also go the margins know, see continue. want we been going for traditionally--the promotions at in but during to place, and basis. those remain do sort up, - to with on will to be of have and our We’ll pricing shift there’s other with margin an the improvement in maximize tend of rise our and shapes to time offers. that,

Anthony Lebiedzinski

you. Thank okay. it, Got

Operator

Thank for your you question.

As would press your question. a record please to a and a and you name ask question, one company to if reminder, ask like star,

with Our Rose Ben next Battle Research. question Road from is

open, line Your is sir.

Ben Rose

questions. A Yes, good thank you, few and Bruce. morning,

OTC? this in of typical your perhaps the terms focus off, was was to more on the trend of this back side people there to or and prescription promotion just business, of natural First mix a or advertising anything the incentivize versus quarter, prescription done

Bruce Rosenbloom

our uptick see be than obviously which prescription skewed and profiles. more more in trend. bit have a prescription over state, have an prescription quarter although was to to medications more higher Yes, a we towards the so more It year. this of during products more a typical than to Again, seen over-the-counter. veterinarians I did rising mix prescription normalized more are prefer year return it mention was of margin towards a Obviously movement increase we our recommending OTC, did

more anomaly. June an was of think I

and I veterinarians with limited having hours, online think were so online it towards mortar was both brick customers the purchasing more new over-the-counter and online--new and moved those customers products.

Ben Rose

great. Okay,

have to the may negative phase, about reorder rate Bruce, Sorry said quarter? you redesign that the did just in that website impact thing you one first say a on the had clarify this

Bruce Rosenbloom

had its it that on platform, ecommerce new that took so With possible. it’s while impact Yes, our search, negative normalized get a to back a stage. natural to

We’re there currently.

our we We expect of the improvement we with conversion see in future. an in changes have many new the made, customer should

Ben Rose

Okay.

like concern looks there this in medium it situation, you guess remarks, some you heading in moving in prepared inventory did were the overall the In quarter. the which mentioned the grand work just albeit Can heading into which items, concerning. lion’s of bit supply speak a you you speak - weaker On environment delays things a to the inventory chain your ability of into just down need. the share your the medications to to quarter, less scheme that procure of confidence is of but was some the quite I slow that season, to know, you of own the

Bruce Rosenbloom

we’ll that carry on Right. mentioned stock make Again, Overall back conscious decision June presented. fluctuate our a the a inventory. due We promotional buying quarter, to COVID in based we there’s opportunities. inventory higher will when to advantage, up uncertainty the cost did

see inventory more our to carry delays any medium type delays, related backorder did manufacturer to pandemic, We retime we minimize delays. or more some in the to of delays. movers, also shipment did those During look small

should see. can Some we Where an stock-up purchase, customers. we try for would of to with are where delays, sure in we will type of increased up, manufacturer up more not we like be - June stock some may those quarter, not million, we delays they so of inventory our we excess that inventories but make COVID-related rectify I will. we’ll any stock able in be able to expect to inventory delays, the saw a minimize can driven to we were increased--with $XX

Ben Rose

Okay, very much. Thanks great.

Bruce Rosenbloom

welcome. You’re

Operator

question. your for you Thank

is with Ace one Ellich from Research. Kevin next Our

line is Your open.

Kevin Ellich

Bruce, for the Hey taking question. thanks

several to back than the a that bit the it last Going years. for your added quarter, in lower new little fiscal second you seen customers over was we’ve quarter the

do seen more vet V-shaped that? this do in the what function in driving is is you competition, quarter, or of a think the we’ve With you visits recovery September think

Bruce Rosenbloom

does Competition play a role.

combination it combination--as importantly opening I pet was more mentioned, the vet mortar think stores and I up. and the clinics of brick

effect negative natural search, temporary also which that had well. affected customers also We new possibly on our as

have improve into I mentioned, an opportunity we on moving think I definitely customers. As the offseason, our new to

overall satisfied where can months, tweak improvements continue make we and think we six with see result. downswing. be, the fairly I that and rectify We’ll need to were advertising the we’ll for temporary if

Kevin Ellich

you little above? COVID or MAP one it. Got customer down track more which all year. this is think function transaction that’s metric or Then it’s bit I a new it a pricing, size, the seems of Do like of is

Bruce Rosenbloom

orders, not sure be referring I’m you’re overall our to to exactly have Also, a customers, new be to what to with comes to, bit but others new Yes, definitely order space. measures a tend promotional do those new play competitive when in attract little more it we advertise.

Kevin Ellich

this and capex higher it, just spend? function bit then lastly quarter. website, Got that seasonality Is a some was little of the a

Bruce Rosenbloom

capital That overall we mode, really forward, XXX%. the any expenditures expect and Correct, was be more maintenance website, and it material fairly minimal. don’t should moving

Kevin Ellich

seasonally QX years, different expected. the margin, the - well, Then for last I it’s that you little continue but know year see gross we’ll is been think than to the quarter probably much of of of it. remainder a sort couple strength the your lastly, better year? Got do again strongest

Bruce Rosenbloom

As Anthony stabilized policies. again in the market with I price to earlier, overall mentioned the minimum the advertised manufacturers prices enforcing

sales, The margins. be Our we to June we new overall, going gross margins have a contributed negative higher to from product that that all margins we’re we product expect promotions be negative our to could in a margins. But have on have can increased The where up but new end we it again the what area if saw from have for in probably bottom customers, quarter, our those dependent on have so difficult; at with in customers, modest margins. to when is effect think improvements see could mix margins. mix, increases be was to we’re impact would looking quarter where one a different and to the positive quarter so line quarter year-over-year I prescription

Kevin Ellich

thank good, you. Sounds

Bruce Rosenbloom

You’re welcome.

Operator

your for you Thank question.

Suisse. a from Erin follow-up with have We Wright Credit

Your line is reopened.

Erin Wright

of relationships Great, in changed those any pricing? there or typically the manufacturer Bruce. is taking do were status follow-up, new quo, MAP terms increases - thanks contracts relatively anything it in work? and your Has for relationships How

Bruce Rosenbloom

prices Right. relationships direct five really with manufacturers, about were large about with least yes, have relationships we increase XXXX, Again, We MAP online have they what’s or helps of relationships price also as has direct it’s margins well that also which pricing--when talking when manufacturers, inventory. enforcing three at which space, the manufacturers talk their increase contractual do the do or the there. and in pricing, stabilized helpful the prices, initiated as in manufacturers many, far we them. two they MAP, so been when also as their have have so and They

Erin Wright

great. just have brands, Then here, changed manufacturer question and Do generics. Okay, all on prescription one-off metrics a any the dispensing you on Thanks. at versus generic the relationships? given has that rate

Bruce Rosenbloom

brands, we the not us as the about say up generics materially. manufacturers percentage to prefer would give are sales. still I promote promote but it’s do, and But their will a to generics. Many over of overall brands incentives our same over us year their they of Yes, year, and

Erin Wright

no, still way do substitutions, I generic guess correct? And there’s seamless to

Bruce Rosenbloom

pharmacies the at seamless rules little with part that bit have for a been. and most the ever are human it’s it there point regulations approval. change, difficult, The relationships to and so is that if our for probably the their prohibit pharmacy and best That the a to definitely do back regulations, for for vet more go does but make vets generic current rules physicians, we substitution is human present the

we yes. back often vet substitute, at for probably more generic not so current that go answer a do to when are the a is than rates authorization Our and peak,

Erin Wright

Okay, you. great. Thank

Bruce Rosenbloom

Erin. you Thank

Operator

turn will back to Financial Officer, Chief your call closing for for Bruce company’s Rosenbloom, now our you over question. Thank the I remarks.

Bruce Rosenbloom

app focusing Thank digital we customers’ up us. experience. today’s redesigning you very the fiscal conference on ends this to call. XXXX, optimize you. Thank our conference and mobile Thanks joining our In for are Operator, wraps call. website This much.

Operator

today’s you conference call. Thank for participating all in

disconnect. now may You

PetMed Express (PETS) 26 Oct 202020 Q2 Earnings call transcript