PETS - Earnings call transcript Q4 2021

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Operator

Welcome to PetMed's Conference Call to Review the Financial Results for the Fourth Quarter and Fiscal Yearend March 31, 2022. [Operator Instructions]. At the request of the company, this conference call is being recorded. Founded in 1969, PetMeds is your trusted pet health expert and America's most trusted pet pharmacy, delivering prescription and nonprescription pet medications and other health products for dogs, cats, and horses direct to the customers. PetMeds' markets its products through national advertising campaigns, which directs customers to order online or by phone and which are intended to increase the recognition of the PetMeds brand name. alternative ease pet home of attractive of in delivery. an price, convenience, ordering, provides for medication obtaining terms PetMeds 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

be statements conference assumptions these everybody may Exchange Actual listen-only those risks, you. would as company statements our future today. later session, until to our Commission that involve Litigation first that the have call. to also Thank press involve we us. number update subsequent conference included this may uncertainties, certain in meaning information will that current the everyone I These based well based portion from information remind question-and-answer Reform here Because are materially of to beliefs statements XXXX to call or I'd Securities be a currently forward-looking differ as of like the based in the uncertainties. will these And include used on assumptions. welcome events, of upon events. Securities on the like will Also, of which Private within statements and this the Act statements and projected. no available could obligation these and concerning views undertakes reflect The risks results be

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

Matt? let me CEO Now Matt our President, introduce and Hulett.

Matthew Hulett

new XX stakeholders President PetMeds of PetMeds PetMed. which I've ago, transformation. to at mark to This of transparency everyone years as be call afternoon over and is pet online our clarity key Thanks, very clear, time, is thank strategic prescription is that legacy us. and progress business and a investors pioneered the To the remained proud. the and X-month of the I as and Bruce. since earnings this committed with you joining for Throughout started Good CEO

in XXXX customer leadership and PetMed slowed related workforce loyal talented large of outside significant continue pandemic, years, However, base. has company a is our to a that recent with position I sales a a in serving the uptick dedicated and and slipped. growth terrific has to believe

call, the of earnings regarding to towards that the core articulation some of of business will you progress new Today, core of taken already and specific of early reiterate latter, number transparent prepared to tangible company. engineering going operating commitment are today's as indications the share to transformation I our is strategy. the more between towards During evidence to this time with new communicate open with that my a how our on we our strategy. I you strategy on and today. including executing my stabilization I of execution be I'm and divide remarks and have spent broader our steps points want we pet some iconic expert this to prescription key health business strategy, have we

I've X for So themes. them clarity, organized into

have begun stabilization we've where year moderate. over the to significant the the business is revenue theme the declines first The experienced of past core

a For quarter in for X.X% decrease X-month revenue compared preceding example, year-over-year XX.X% our to the decreased period. the fourth of

our weather had impact digits, in material While low-single declines quarter. had a and in March more revenue January the on February

demand normally of to a month final Specifically, in and tick delayed a much a customer the cooler season, March ramp-up the quarter. for flea represents country a leading of us, start which in the of the season slower-than-expected

double-digit course being Bruce as customer but the expectations achieved the in Based to We our on quarter medication stimulate cover or will down only much impact more exceeded of more the X.X% third in quarter. will loss fourth higher for compared the we normal for demand than decrease as and this country these of of temperatures parents. to start the EBITDA detail, Adjusted by year-over-year from reported the over sales return the rather this expect rebound for XX% in increases general the results be future purchase and that flat to percent flea a kept category stimulate infrastructure headcount due compression despite seasonal heartworm and the in sales expect tick to purposeful historic marketing sales support patterns, summer. spend and a to this expenses relatively a administrative to year-over-year. we our Notably, year we growth. to of and delay variable pet sales investments our

in As you spend. inefficiency that in quarter may recall, resulted unexpected quarter, [indiscernible] a marketing had our we last

settled our place into We have a with good now marketing operations.

key testing and customer activities learnings last new to our number. grow laser-beam We are on our from remain quarter actively customer focused

we bringing on new While team just code steps, our we on the new are strategic growth, Chief new cracked recently segmentation on Officer. customer several started customer not have executing fully like strategy new having and Marketing our members

as our that subscription report the previous of business. revenue am XX% the I recurring of our Save from our subscription is second & pleased The AutoShip This quarter. whopping is acceleration a March, from is Today, increase theme of revenue of derived program. month the to XX%

a in call, last strategically subscription earnings e-commerce metrics our are we mentioned important as business are new our As evolves business. X introducing that into

expect over more our LTV customers. from creates recurring see As as time, increase a evolution, reliable our a to stream an revenue result program the of subscription this in we

us approximately quarter Our definition more purchased of is the and who the new new years. for our count using customers past to The customer the new customer count not is CAC those as X.Xx. specific previously calculated the LTV from for X within quarter being XX,XXX have is

measure we the mentioned versus more our of CAC value is creation using meaningful to ROAs traditional a metrics. LTV As marketing earlier, believe I

April LTV average is to expert our announced number of the greatly our over that the initial in our experts strategy, CAC basket program strategy our with being of strategic size health subscription first pet XX, to building telemedicine. and we we as this life customers see our deployment and of of of value partnership Save an pet acceleration strategy. final rapid or expect this more & our health AutoShip block the We On migrate grow accelerates The order investment to the returning customers. pillar theme expand

that You announced we strategic that during a a health pet telemedicine is platform Vetster. talk delivered with exciting of at of date, our call. I fastest-growing bit will telemedicine an pillar capital will recall industry-leading This strategy. partnership space, many about later exclusive the on the first I the hinted we and on to may enter approach that And last this build our allocation novel to this expert call. transactions

the into deeper let with Now presentation us material. dive details the

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start a the with Let the current look and perspective market on a overall opportunity. us at

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for the healthcare. digitization accelerated pandemic trend Lastly, the the of increasing

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our trusted. widely known is brand and both First,

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recently I expert, interaction customer. health responsibility customers pet trusted to we seriously. Our PetMeds take phone a that the pleasure a a had view listening and as from loyal of

said, nights I from parking to they about the lot with. compliment of so cultural hospital say. you and They the absolutely to "I they mail to I make emergency weekends. this can't I called Cindy, both named called medication, I sympathetic, over open explained my was of just and And situation. representative and sure sure had before people get It's a to day I clinic, that going guys I want just I in kind for medication, next I I spoke the wonderful. that you. the to the Monday that I They make it's two to, how PetMeds thank this bent I'm day which rehab. later get and the Gus, what spoke morning. that and talked had me could then Here's situation fantastic the to prescription have backwards he to is even The I were understood that enough. to the opened how told and were feeling.

are at they not their This Gus dedication Cindy company. You're service. high-dividend This exemplary are These are been need. customers employees' selling somewhat pets' recognize in examples is and when pets, and customer is they our food sick, of and PetMeds yet base a historically or perfect like are this important." and low-growth to story has delighted music. buying not our for them and I'm real to their share our PetMed. well-being,

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And a clearly business. and are model positive. to subscription due flow a models their is We equivalents stable are compelling USDXXX recurring businesses XXXX. direct-to-consumer and million have approximately in from cash transactional much business XX, cash cash flows. we PetMeds of of as moving predictable March Subscription to business our cash

of month program, with enrolled and subscription beginning the customers at number the anticipate call, of the approximately mentioned we AutoShip our ended continue rise. our via Save ordering I As XX% of we will March in this that to &

and to is service a the of quality continue indication of customers, have the base of deliver. an that large returning which value We we

have to parents base us fortunate two large of pet are X We a over from have over that purchased million the last years.

more licensed outstanding as is our experience of much pureplay value. a pharmacy, would in delivering the This pet XX ecosystem, makes and other I complicated years XX the states, over pet experience fully what part have We service segments which of domain call progression into easier.

and service. just customers brand Our our love

puts in Our in NPS most the beloved brands over which world. along score is XX, the quartile of some the upper us with

quarter. to Now have financials for review I'd to the our Bruce like

Bruce Rosenbloom

Matt. Thanks,

include strategic our and our operating to the XXXX situation unique a recent environments Board EBITDA share faced We EBITDA our introduced and compensation. During post-pandemic. of we regarding and XX, that decided more fiscal XXXX. highlight profitability operating non-GAAP compare recent our year's share. key the EBITDA future evaluate by mostly to to would because XXXX last adjusted of plans, March per accurate they noncash also more the we of management quarter are stock-based on EBITDA underlying decisions capital, between increases ended measures picture March comparing last Throughout by generate metrics fourth new review our like which performance, a most ended our new Adjusted year, XX, quarter and these used quarter quarter, per different allocation totally adjusted and will financial financial to XXXX, on also adjusted we've metrics that fiscal make in highlight X results, and I provide

year fiscal XXXX, forward XX, improved new the our year, more move much March our ending processes, agencies, our we first full to partnerships, marketing with we many of into efficient spend expect with marketing place, variable with in and results. and with highlighted firmly As be our initiatives

same USDXX.X million for For the were X.X%. sales sales period of current year, year, prior fourth million a the decrease to the compared quarter of USDXX

were which January for in year, saw sales While disappointed overall to down we the the trends February, quarter the we low-single and compared by encouraged in sales results with the digits. were only were the prior we

subscription March. contrast, our month program. started mentioned earlier, the Save our of subscription from offers, in AutoShip the reflecting our our resulting revenue in AutoShip month XX%, in enrollment decrease Save growth discount weather in a our products XXXX, program brands quarter reorder this as the as positive generated a saw of flea, in flea, to our March highlight our fiscal in for of of heartworm exceeding However, AutoShip popular the a Growing of result with required Approximately, to XX% delay In the & control of for colder year, stronger which some the season, main alignment more is grow. tick, and was in see of Matt one program. continued continues we subscription A season prior early tick, as heartworm the we spring, of in promotional expect demand March. & and trend priorities our in revenue revenue to sales the was and AutoShip

During sales. the both decreases reorder orders quarter we and saw new in

and thinking area sales needs one actively deploying New new and order reenergizing initiatives new are improvement, obviously growth. customer that around we're

XX% fiscal same of customers in sales XX, the USDX.X X.X% the to the for year. the to year. same in USDXX.X sales period March compared Reorder quarter prior for quarter reorder the by million million decreased XX,XXX XXXX, to USDXX.X compared for million quarter, prior XXXX, acquired, the sales to order ended decreased million prior XX, quarter to for to March ended XX,XXX the USDX.X our approximately New year. quarter the by We fourth same new compared

reorder million for prior the by year, million USDXXX.X to decreased to full USDXXX.X X.X% year. the sales For compared

will with base. relationship see our to rates, opportunities continue loyal build the increasing to our we AutoShip With more subscription adoption customer

We customer continue look will reorder our to loyal by also and offerings services. to base our with sales improve to product increased marketing

make certain of of add compensation, noncash EBITDA to Adjusted income adjusted profit a XX.X% adjusted fourth funding gross state shifting an expense, AutoShip. USDX.X from a compared percentage for our per related and year EBITDA the was future of share, and fiscal are in ago. per diluted fiscal or for their quarter EBITDA evaluate quarter our may rebate same adjusted reliance was compared earnings quarter regarding and the fourth XX.X% aided Adjusted our reflecting sales some adjusted prescription March to margins USDXX.X of can diluted or also management million, benefits: net grow to promotions the product basis, Board manufacturers For tax including EBITDA diluted decrease measures the Again, of USDXXX,XXX X also recognized the and a USDX.XX plans, expenditures, promotions. amortization. cooperative compared discount as to USDXXX,XXX on back same and XXXX major our XX%. operating million, continues, gross USDX.XX year, the USDX.XX depreciation the used This reduction income interest share, basis, state a quarter, generate stock fiscal for was tax the taxes, if or XXXX, X.X%. to strategic share which a non-GAAP of performance, during the rebates a in quarter. USDX.X to medications marketing increase income to XXXX for last related for the Net rate by without or diluted due was and share to shift opportunity percentage to by funding per quarter the USDX.X the was on income same sales decisions we XXXX year, There Net million, be allocation was of and USDX.XX million, March income future capital. discounting costs quarter period operating to a to per EBITDA in to decrease and EBITDA key last reflecting price and improve of

future in financial our We will to continue measure disclose this filings.

by ended Matt being March mentioned March being down adjusted XX, EBITDA the for earnings XX, for XXXX, call, ended the quarter exceeded to December down As our only in for fourth X.X% compared XX% quarter expectations XXXX. the third quarter earlier the

Over general seen double-digit the we headcount infrastructure. and expenses increases in investments to strategic administrative due both past and X year-over-year incremental the and percentage in intentional have months,

investments growth. We will the making and business future in continue purposeful fuel to support

equivalents the expect to investment see which a also expenditures is of in to our USDX XXXX, approximately no cash to to stockholders. and in The fiscal continued and USDX.X of cash returning of XXXX. incremental committed company as to in had debt inventory business. XX, continues the capital in to million We million million March be capital tune million USDXX.X USDXXX We with

May XXXX, will of following business company's shareholders the XX, declaration to dividend a Board Directors Please financial the and the payable of on note that dividends subject the be Board to close the that share USDX.XX of each its such, of quarterly of May per review performance. will of and is declared stock payment a Directors As of be future XXXX. on discretionary the by common on record quarter at determination company's XX,

like back presentation I'd the to Now Matt. to over hand

Matthew Hulett

journey ourselves over company. re-envisioning embarked the Bruce. have consistently into years. process. and purpose. company, company solve excel need clear how XX we at Through we evaluating In our focused a we that pain, a company's to we and core a many planning function Thanks, health customers' to on that on redefining how for for the pet first market in and joined then our expert. our saw customers have place identified where we starting for future, and and served as ways, being we this as for delved work, trusted use today market ago culture In brand the We the a X our we when I wanted and months We new looked we reexamine our

customer-specific substances, contact extra your with requirements, drug phone, that When To vision monitoring short we're and paying with the I authorization for specific the over us and regulatory et end, veterinarians, to cetera, about with in perhaps mission. online demonstrated most hard. difficult quarter it, of interactions medication controlled pet prescription. complying competencies is the represents or selling prescription of to either the ecosystem. have you dispensing both our like It pet's If from collaboration ensuring you further. We pleased combined and think and with the to capability health attention extend am your important those pet's accuracy new needs much unveil details now and involves

Our pet healthy to long, live vision, every deserves happy, a life.

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Next please. slide,

talk long-term about We to degree specifics. of are now ready some strategy with our

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to make big more accessible, healthcare, we to quality about human will be goal a We our see affordable, especially as this as future available great and that business pet will levels. believe stakeholders. current of e-commerce wellness possibilities services and well subscription the pets combined is parents more pet adding it growing a pet Our for and unlock shared We are in trend our everywhere. our is excited beyond partnership telemedicine in all base and our health healthcare and to

confidence We is transparency level and of demonstrates customers This focus our company. the and this have in our they while a a into huge our investment the hope the costs associated business some providing of our as reflected new detail future take Operator, for to lot we now questions. left are to in do and I growing results. operating ends remarks. ready also prepared the insight are certainly activities

Operator

Instructions]. [Operator

is Erin with from The Morgan Wright first Stanley. of line the question

Erin Wright

you that you start in to anticipate do flea seeing? the with somewhat parasiticides What bolus trends said Great. you you're here the demand seeing should here, was How terms but and out off and associated season anticipate we of a playing are slower that of from current quarter? quarter-to-date what the progression a tick meaningful in

Matthew Hulett

Bruce, want that to I and do can follow. take you

Bruce Rosenbloom

the we Erin, saw in previous we during for March, information what the definitely the of saw as we similar strong. flea in manufacturers we tick gotten mentioned, out We've and quarter, demand we once also Obviously, March unlike drop started hit slow Sure. XXXX. have a very season.

season see it has saw we and season we've quarter. shakes all In we'll in period. that out quarter. current definitely the that's X-month past, see of year. In the out the have past, We'll early or have in that yes, in say through the I it But seen. So delays March, I June extended. that it's something plays how just to a think for traditionally, how gone in us would it the coming

Matthew Hulett

I'd thing flea The tick add concentration and heartworm. only said Yes. to Bruce of and have that we do is, that a

out are And were quite in costs February. to that and so feeling even January starting confident we

control in And concentration those areas. do We so have unfortunately, category weather. you the can't

loyal have long we a very that confident we're So returning base.

So when back the to Earth we heats up, we expected them. anticipate that get reorders will where

Erin Wright

here. Okay. And follow-ups quick two then

we about frame the advertising spend. in telemedicine you? And the from And percentage bit you help guess, Given sales contributions up that material the around advertising for initiatives spend the us a anticipate terms some in coming a a thinking about of you're then for partnership, how in more the in Should step this of should little be as of you terms here XXXX? quarter, spend describe can quarters? and for of term? fiscal thinking I we advertising will near how on financial be the

Matthew Hulett

last a then to first Bruce. telemedicine fingertips, to are a having is I'm to as we opportunity the have it mobile be the and that throw the take to I'll since prescription a and in exciting their Yes, ability offering core we Obviously, of question over prescriptions space have piece, on it literally on desktop doors. thinking pretty the consumers. on want device their their either vet to consumers of trend front at their delivered connect to in or

over see We new a to big demand see for is. are relatively We vet The relations aren't new. consumers. the loosening more really connect It's well. really time which regulations with guiding as how opportunity that VCPR really, we consumer the and this

well. upside know, you it. we're we on se, as think a excite the building and to So started develops. but And to this they as are marketplaces. space we've excited hard this we're folks we from the pet to that to of love multiple know up come in guiding, best and telemedicine the extremely get the have is space forecast, very in team about marketplaces They very successes had Partnerships well highly know partnership per and recommended Vetster. not This very travel seasoned really team is

to that our start for the put around. growing bet demand this business team confident right highly us we're and to is and So product model around and

comment, the On follow? I'll take want and do that to you Bruce, other

Bruce Rosenbloom

Sure.

spend. advertising, advertising down the spent that there's are was season the about similar with you we last target so to expect year. to our what see we due were that be for when quarter we on if of back the spend as we previous our we much would spend we where saw to we year. areas that a in and it. to more slow better efficient last to to lean take USDXXX,XXX but where say spend XX% similar I start or we that, to far probably that pared And expect about obviously, we'll from somewhat producing more As in advantage Obviously And were much -- somewhat return, year, can

Matthew Hulett

flea were to not and that decided it's Yes. demand The heartworm. right. we tick want only accelerate and spending paring to consumers and that. when to We exactly because thing We sure there to money back was I'd -- were add make

thing how and over high the introduce our where end. saw, on the CAC consumers of finding lower there's than we're be just that depends to X.Xx is doing LTV about other you change as The that to time smart we that do to We we It to that may we this a And decided the think invest. X.Xx want types on be we number. spot scale demand. and be It invest. front that. could could very start

should X.Xx efficient gives pretty past, some around very a going performance-oriented to the But higher you it be LTV So CAC. the to seen where -- is going. than we're in but we're of that you've direction be

a around move little might that think I bit.

Operator

line Corey the comes And with the question Grady from Jefferies. of next

Corey Grady

maybe I little to terms of wanted on return signs follow you're in are up spend you ask and continuing new time marketing areas to talking the and where to strategies areas a more And you partnerships. where of about test. seeing validation

Matthew Hulett

been much building what we've platform this date remind after a basis, you I think to for the a again, kind growth. this, for know question. of Thanks that discussions our and I'll of to jump one. I really has Yes, done on want you,

pet's really expert seeing positioned interest health for for to lot are kind health store around more we're play that. responding consumers pet that's is segments As a in some headline are with We've strategy, something versus we that the implemented lot. been and a We testing think quarter of customer operations more marketing been we've marketing digital broader last a really you your of and had new everything I new a can partners, younger And a recall, new inefficiencies. testing standing pet, technology, native.

our that. So game, that mix our we're around to will and starts positive I some going think as to scale, our around And and that see creative starting to early adjust we're positioning scale. media signals

and healthcare. and -- pet net find grow And dollars XXXX understand customers definitely profitably our way there's will of X,XXX scale, Russell to companies point really stands tend I proposition would profitably. we not I call, X,XXX out And new profitable. on customers. I think we'll earnings really scale said think the for that's We like PetMed like to for are I spend exciting that a the customers. out

Corey Grady

tick coming did helpful. Got my sales I the you to order, delay results if and flea wondering then of new from into quarter? terms your That's quarter for quantify the it. in And expectations how how of that versus reorder for composition, could second season. question, And did impact was then the the compare sales

Matthew Hulett

I'll want you then, start Bruce, and to do finish?

Bruce Rosenbloom

Sure.

Matthew Hulett

Yes.

That out to. a going optimistic As continue It's for comps. to that than we're just that on, actually that, were and we're really a We unfortunately, to has of the transparent we been anticipated. for was for I something customer trending growth started the February, think an and will where while. said pretty March on improve. the been net call, January issue work And And about to new colder earnings evening wanted important to really we we've actually us. was those see metric company

were Bruce, add than saw. what So to do you more you flat anticipating returning to be that? And we customers any want color to year-over-year other

Bruce Rosenbloom

the I the was would X you in think March, look say Marches, obviously, season -- year. that strong really last the surprise when I at

delayed higher. between much Marches totally season different numbers just versus on-time our X say So season. you're were would early that reorder a comparing an I

what were it going those the than -- probably affected reorders you I into were from there. expect the the more was -- season we But probably think we dichotomies so X March X, that out in again, would And when have we delay quarter. of

Operator

David the And XXXX from Instructions]. with the [Operator line of question next comes Maley Partners.

David Maley

the you something mentioned the of be transactions. pare road? is size? would the dividend? eventually Or be might expect we likely You first similar the it And many there that bigger would to to so, down be that if deal I transactions Should Vetster a that's the much lead that is that of guess,

Matthew Hulett

David, for Thanks, question. your

have there's then use. we put think to take cash capital cash, take lot part parts and that, to the the I'll side I of the allocation second been a obviously. is The and hasn't X first really I'll part.

products. to in you partnership And want accelerate from They thoughts saw need so our that's are pet on want aligned other care, an And investment around health. customers to diet, there's those areas we whether and call really we or medication, really really around mentioned fill of They good pieces more to think that around where have as really more driving out that our that the basket driving fill us. some services want we puzzle that medication wellness, Vetster. in. pretty it's I investment, on around how And more an is M&A, we're what's

opportunities. So we're of M&A like insurance, types discussed we're open a look that profile. to to calls Things certainly But as in we that going partnership leads type certainly, earnings of to more continue of well. at to those

some could As we commitment asset filling a be But to we're there to more to settle as in And change, opportunities puzzle the the cash. there. prices economy think to buying have open I the starts start down, side, dividend using on those pieces dividend.

know, we around start the time out, we new better grow that looking discuss as driving. We But want the One have That's customer team new struggled growth discussing probably to to we're acquisition we customer we'd calculus that. company. understand as the can growth. of the get customer that types the that at figured as management things you time a of starts and how with fast recurring we've we start all

unprofitably. And grow the not also support decided we've dividend. also so we've And to company decided to the

entering problem these not actually lot could e-commerce deciding a decided profitable to business a are -- start And business, that of think We difficult to starting a that be we're some an companies to periods down more you have I into do. unprofitable which of to as take this see now.

the excited short, cash. partnerships investments M&A. having through dividend. a about growing we're actually time. the generate certainly with and through lot we support So to the of conversations Board we're all going We're in And But

do So opportunity both. there's for an to us

And generate so somewhere billion bit opportunity USDXXX want about gives news It's said lot lot the us than And the probably a there's lot folks good terms little it I unusual call, companies, a work and else Like you a deal space companies prescription performance that not And of companies. us. to that more work a of many on in there's there's warrants. like the seen a to health pet to the are with with pet saw with space. want you've is Vetster us. an of the

we'll to, a partnerships. decide I we a to of hope at really Until look, inorganic that's keep new longwinded growth, So we certainly the I find when customer lot that us then, answer discuss through there's If Board. can can that opportunity going. answers or semi-organic not, for ramp question. growth your

David Maley

Yes. No, Really appreciate good it. color. good. that's That's

Operator

There now will are host. the no back the this turn I to presentation at further questions time.

Matthew Hulett

Thank you, operator.

than As just you just is a much heard, the broader prescription e-commerce future company. of PetMeds

hard pet trusted building in forward into progress out and health as not-too-distant you leverages I updates the subscription are our and experts. status future. transform look e-commerce to a to that detail our with and We brand reflects broader will to and providing working the continue strategy our

continued the customers, employees, support. suppliers, and of conference and for in. our you for partners, Operator, always, you this your to As ends listening call. all thank confidence investors Thank

Operator

today's conclude you please does We line. your and disconnect conference. you ask for participation That your thank that

PetMed Express (PETS) 10 May 222021 Q4 Earnings call transcript