PETS - Earnings call transcript Q2 2022

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Operator

Welcome to the PetMeds Conference Call to Review the Financial Results for the Second Fiscal Quarter ended on September 30, 2021. At the request of the company, this conference call is being recorded. Founded in 1996, PetMeds 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. PetMeds markets its products through national advertising campaigns, which direct consumers to order by phone or on the Internet to increase the recognition of the PetMeds brand names. PetMeds provides an attractive alternative of obtaining pet medications in terms of convenience, price and ease of ordering and rapid home delivery. would Chief turn Financial I to call time, Company’s the Officer, this like the to over At Mr. Bruce Rosenbloom.

Bruce Rosenbloom

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

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

Matt. now me Let our CEO Matt newly introduce President, appointed and Hulett.

Matt Hulett

I'm and to as company excited my earnings Interim I’m acting My I Officer on to is morning to Thanks call iconic Matt Bruce for thank us. honored and like Hulett, arrival. and begin and enthusiastic PetMed. new of be Rosenbloom Bruce. to the by Executive name this would Chief I'm this you prior thanking joining for today. join CEO Good incredibly

I am you future. to personal and PetMed’s and so like why our on first on optimistic QX, our thoughts Before motivations we my share regarding about update progress I would

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veterinary think the ways. fulfillment for moved door online to regulations We the In the opens telehealth of prescription time temporarily this the first related and and were in-person acceleration digital services. fact, visits in pet waive based unprecedented in market to

several leverage competitive that I in look business, future. the key the we there advantages are can As at

their pharmacy known their a takes and and First, PetMeds our years brand as widely is to strong customers experts. our trusted. develop medication and as brand to pet Having trusted look

operational strong quality a and efficiency as pharmacy. have we Second,

get service is our our delivered and which their quality pharmacy products platform. also but world fulfillment accurately Our integration ensures quickly, with partners high care delivered that vet class, receive our customer vet through customers and

network we with has experience the over vet latent have largest worked space. deep large of in company's We with veterinarians retail is a of history. a Our networks that the direct-to-consumer advantage. the online over one currently competitive community XX,XXX vet the PetMeds have

as has This currently us because portal vet and asset, clinics. our business. vet capability fulfillment expand we enables scale online a veterinarians XX,XXX capability, is our core an Our to it

authorization medication rates highest of to they received. been the which have prescription we speaks ever veterinarian volumes Our cooperation level the are

pharmaceutical PetMeds Being to pet business differentiated is expertise strategic. I bonds major and focus even them relationships coming as of more has to relationships our offering, strength. Again, get market to in with continues come with all allows PetMeds something our close provider that partner as a market see have we supplier enjoyed partners. time more base. unique view the and products developed months. category we our more we over a Our growing their especially customer brand with our competitive. have on where even long to Today direct become our suppliers to of Those many the

and service calls customer hours overall customers between entire on organization customer just and our and trusted built in experienced of customer permeates don't career. service Our we relationships. customers, interaction integrated I've ethos have our our centricity We transactional empathetic have culture and sat tightly my never such in phone personally agent, our and I our centric with team. a a

that we compelling, invest over have cash on and reasons in to in would our Before million compelling fundamentals are We a like and to $XXX do flow cash reiterate including balance several several core we continue strong invest we PetMeds. to positive. I have earnings PetMeds debt, are sheet. has to performance, comment not

history have though equity shareholder over We and that returns long a strong has a historically of return dividend providing our been on XX%.

lifetime July and are XX% launched program where have in to relationships & Save that ordered with building number we we customers continues and started value to build of a based recurring rise. which customers with just subscription our We our through a higher program, and this program recently via new customers. In AutoShip signed through our September year, recurring our subscription up AutoShip & our approximately Save

has positively Our AutoShip enrollment customers very Save responded steadily the increased in quarter. and throughout &

sales of eventually year, many our our with transition to continue the to by customers. & reorder AutoShip expect strengthen Save end relationship fiscal our to We only will of which our

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

XX in continues up pharmacy to pet value our a fantastic play as by service sum we years strengths, experience loyalty. rewarded with So licensed delivering to recognized core have be customers and over states, of is pure the XX which only as company their

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

a customers over direct-to-consumer brand X have two a We years. last and the are growing successfully active market more addressable serviced we million with than rapidly

I Now, our financials review Chief our the have Rosenbloom, Bruce Financial Officer to for to quarter. would like

Bruce Rosenbloom

Thanks Matt.

review the we’ll financial results. Now

to we and post September in September year's increase XX, quarter comparing ended second September on unavailable. some many caused unique stores commerce to ended faced XXXX XX, we’ll We XXXX pandemic. XXXX. refer driven between off situation pandemic, close cases XX, back which which were retail demand and different our many ended XXXX, result the will by environments to We last compare a quarter quarter Similar primarily as strong veterinarians September in quarter a the was and June XXXX, on of the year, XXXX pandemic to XX, last two totally coming to be fiscal

demand, CPM while by the and the stores continued rates dramatically CPC up pandemic to XX%. was advertising more were business, the during quarter, open market abating and most increased retail for with However, recent than veterinarians and surge driving

XX% approximately less in due cost to spent we increases. advertising result, a As these

of ended second sales but same a in both The fiscal sales sales. quarter due the decrease million prior September million the to sales was X.X% versus order XXXX XXXX to on sales prior for XX, in pandemic. decreases were quarter to and of reorder period For in $XX.X $XX.X were the XX, compared ended new the year, XX.X%, only down September the decrease

a by were space same costs higher the competitive negatively impacted to and last market a with quarter sales compared advertising crowded more much substantially Our year.

the positive during months down to some there to primarily Since million the $XX.X August We September visits ended while company veterinarian quarter. quarter to August quarter especially most XX, versus size. visits to their visit more September owners trend during the renew we for by prescriptions in to were a medications during to average continued compared when see pet were being owners sales directly pet a sales their by of year $XX was and In ago, slightly the last veterinary the sales the during XXXX purchased were renewed. A Reorder disappointed more the visit We XXXX. however visit, negatively believe We our positive you for in was past quarter their reorder the vets our exams our to in in for order of their pet XXXX would to prescriptions. back results $XX.X pandemic. reorder half XXXX recent sales in pre-pandemic. to September of the expect sales stronger sales owners and pet both this quarter unable the veterinarian a increase in increase quarter, to Encouragingly as the and their with reorder months addition increase same sales trending was the them were impacted million reorder compared while up XX.X% decreased compared from quarter dramatic year, sales the needing due sales million. veterinaries were the for six highlights XXXX, during and fiscal reorder believes anticipate to

the over mix gross last $XX a higher The average year to a less quarter approximately in to was our can ended items. over for in compared margin September quarter quarter with profile counter counter Our the XX, for XXXX. AVO to shift increase attributed same to be value items for $XX the prescription and in and items $XX order more items prescription comparison having product the the

and ended drove the demand earlier, As advertising bad dramatically. prices our I competitive, was this extremely [ph] the mentioned XX, during September quarter market increased XXXX,

a advertising prior less than was result usual impressions As delivered efficient and years. our in spending fewer than

In terms ability the new advertising to spending its recent customers. of this we most attract quarter in and was effective less believe our

in $X.X to approximately decreased XX,XXX sales million in $X.X year. quarter We quarter, compared acquired to our the order prior new the for XX% same New period for XX,XXX compared year. for in the million customers the second prior fiscal same to the by quarter

new our the should we that increase should advertising customers anticipate thereby and subsides, and as more efficiency future. help back which of us further However, effectiveness help continue the levels more normal prices to to spending, the pandemic media in gain revert

efficiency We of many marketing of and are expectation of current our resulted in marketing results. also partners improved which marketing reevaluating relationships, in the of changing has with process the our some

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

may as margins shift half to gross rebates. ago. its will per on opportunity business on of was fiscal prescription the XXXX to $X.XX for costs the million Board review. in fiscal Operator, marketing second dividend manufacturers the decrease of and $XXX.X of the There can The shifting payment performance. period future declared ends XX.X% profit For Board same cash record be to had ready The compared the to quarter our Directors of company funding of medications major the in a stock. share company’s November we an gross The be will XXXX. quarter, be as sales on payable if to in a to Directors are holders; XX, also XXXX. with financial common their however, product questions. the take continues following be XX, of the returning some committed of inventory The each shareholders for review at X, XXXX of now second percentage stock of to capital September November be to attributed close percentage the by our XX.X% financial dividend and continue. of cooperative dividends a company’s discretionary quarter quarterly and to of cash the equivalents to improve no declaration debt the determination $XX.X subject This to is a year million year from in discounting the We and

Operator

Instructions]. our question Please Sidoti. first from Lebiedzinski [Operator from And is question. your with Anthony proceed

Anthony Lebiedzinski

Yes, thank good for you afternoon, the and taking question.

back Bruce. and So welcome welcome Matt

what's bounce of sales, in perhaps the far mean or of that impact certainly year. you I that. kind results seeing driving half market mean as confidence quarter. you results, have the good quarter things what lower. to of back order I the in But the I’m far maybe just you being better advertising gives So fiscal some so curious back as guys will felt are as obviously new did the current

your wondering sales. to the new level back order confidence about ability with bounce Just about your

Matt Hulett

at from in we marketing fast say two partnerships to We while thanks looking soon. I small for you basically then and and out couple we’ll entire done questions. months in though. rolling the to free taking customer Matt very last is things one a this I is, that agencies Anthony, our would in. our hear have again; acquisition. new last, say that; chime and rewired Bruce that four the A Great weeks, to – would the and that here are of I’ve been to feel be bite about We’ve approach

where So we we're capital spend looking our to at spend. allocation

a our of more a of really that’s return advantage, are too better we aggressively I actually system on new advantage tracking haven't where reengagement. rates customers been spending time think rewiring and are in we’ve sources haven't to lot changes general, think Two traffic, in been have taking rates we spending where some seen And channels, some a we out and of we and we databases is, our around seeing for we focusing the there. lot one.

I the got to the of decision. more think have to party some loss first obviously Apple channels IDFA the expensive like of data due Facebook due

that increased getting just I are in CPM obviously channels still some are we trends. those But in seeing others terms hotter favorable of So think CPC. are and

did seeing past. incrementality each is on which channel how what in depends different we each but of we than us are the at really we it channel, for looking get So the and channel,

Anthony Lebiedzinski

did [ph], margins, items specialty now pet been typical you more in got okay. then, like is have much terms Okay, that than obviously medication. you shipping dog of which your And mention gross it, heavier the

of AOV, how impact So because to gross look align you be as like the good should think going as to we a hand about the increasing is that. sounds here, of one job our margin on you're your you we how – doing it but models like

Bruce Rosenbloom

that Yeah question don’t Anthony, to I’m going take mind. you if

will spoken quarter, we lieu going may you during discounting price before, the it our price item. the just in far we inventory, as and but below advertising off and funding discounts margins going our to like where forward, in of CoOp instead are have be probably these items of quarter, as getting past as that the the have or or vendors know rebates our marketing shifted line line be of negatively impacted our the the to margins the these As gross offline promotions products to

we factor, also see moving as and back as margins, overwriting moving margins because versus but of to OTC, far back shift our to as forward items. moving in do that with mix shift resemblance of expect our we post-pandemic a that gross however prescription positive will you in pandemic an as some more see forward, to normalcy, it when comes trend going So of

Anthony Lebiedzinski

it Got curious as then as far thoughts to at get and Matt capital pets. just [inaudible] looking allocation, your the of Okay.

been company the there? cash and For get years company your are divided, to should your especially that just dividend a very wanted that, and you we think you know what a maintaining a lot the about thoughts to healthy know, cash the thoughts how has position. as of growing started with about I

Matt Hulett

great in there's to question. being lot of looking say this efficiently fortunately also this a a million you but there's as low, give with more but in try at calls do think get position. dividend early your nothing of in I There's market things I a pretty with over well, a to at know cash cash with articulate in higher rates we’re a at ways I've looking future, pet of it's we're think to the the well, cash system question, little eco we've $XXX to going long M&A know be But to look I’d always listener unpack and to such lastly, And obviously. consistent divided, and so a cash to here capital other announce always the been me deploy subject change, it’s past and space interest in partner, large with to you it’s to the opportunities Yeah, different to that several that – I'll ways there’s returns. lot so been strategy. certainly there, we slightly verticals, a of earnings answer. as lot a than have so for allocate that lot businesses those of the different a since

know been for around I’ve You two months.

think I do to But months, kind in of capital opportunity deploy six lot to feeling because given four I'm things. was now felt the better and I there lot in there's ownership. first about think learn weeks a settling of pet tailwinds differently, the a and like and especially yeah,

non-answer Anthony, that I on. obviously a coming at will So than quarters that other update make expect we're answer decisions and I we’ll that's some taking the in of kind a everyone look would fresher we think that

Anthony Lebiedzinski

okay. forward. going of luck Got Well, it, and best thanks

Matt Hulett

Thanks Anthony. Great!

Operator

from our Steph with is question. And Wissink question with next Jefferies. Please proceed your

Steph Wissink

Hi our for everybody! taking Thanks questions.

is business of feels net way vet to that to start in The some of the that inverse about correctly heard some think go you see to second primary derivative it back first in tend in your prescription correlation, vet so to right refills remarks when there prescriptions comments vet is your sell and and you there OTC up, think Is visits secondary where to follow I an being directly prepared or up business? go that see prescription the a your around I visits is, you'll wanted those just impact. the I in to

Bruce Rosenbloom

This is Hi Bruce. Steph!

there was virtually welcomed pet could and versus are year. to visit that the year. time. question. really pandemic, It vet So last trying try vet definitely seeing our that the owners online many Last they we This now the this to all that the for up address me opened year we an lost many for are what year pet really – for medications wasn't and and something give so really let were offices to turn time, were understanding of business closed, information last for clinics where year and during alternatives those medications first all were making was

making they you month haven't enforcing owner period, into sure they So coming that their pet XX clinic. are that seen they making is that a know sure pet are and

and then almost resetting our it's the – the you data we a of for vet, going this of earlier cycle we went time many a owners re-order know reorder, in are prescription through for the was online in the refill that our and of half through and and to reorder, can ahead is and So sort pet when there call. what see know expect subsequent we'll I for it's second of the to we referring market go year and the that to buying fiscal

Steph Wissink

on Okay, got my is spend. And it. then second ad question

you marketing marketing bit costs plans mentioned sense of mix levels out both, you're do you you revert. of be still to the improve also Can to you there a your pre-pandemic used that to or even to a give remain pandemic. quarters inflation of if elevated. little the tweak to talk us purchasing next related or some bit think try think maybe a couple I a if I little doing efficiency, you just them your a prices expect over I’m to about expect post you basis And back to words go advertising less you price what the to bit expect efficient. on or the that, could curious do

Matt Hulett

at data to the Google, TV, but looking take and Yeah, channels would things; way specialize purchasing first. second change media spent a in today, quick that’s of new a we've going implemented. with we're into and A been decisions then so us there that Two won't configured making media pair around your know to we’ve is quite another, bit. obviously I that lot say that rates of around that, of And think dancing you with fresh implemented around have know adding just in you Connected you the the way whole media overall a partners significantly. and first areas with specific is, Facebook, say I'll question, I’d media your I which of marking out there's themselves, our we've media. more have couple new actually one. question help know to get buys eyes, options plan been lastly We're I

season it's it’s know optimistic of the ago. more I to we time little the things in into say, say I You when would you with prior favorable and I’m but advantage pandemic, to was advertising, a early be know since holiday space advertising tell this than Stone took learning bit started during the would a language about that rates to too leaving months I performance. very like Rosetta I brand because to advertisers going were was competitive two rates I buying

Steph Wissink

Thank great. that's you Okay, for help. the

Matt Hulett

you. Thank

Operator

with [Operator Battle Please your Research. question. proceed Instructions] question with is from next Road Rose Ben Our

Ben Rose

look in advice. that to to regard haven't and to with in telehealth was way future. the some market you some the way know chance envision or slides expanded afternoon, monetized of being Vet’ you you we perhaps offer had that being with service you what you thoughts I A to ‘Ask questions and now post just forward to about have whether and the curious know health couple I growth Matt pet the in Matt, a talked On good your the meeting Yes, meet but regard call. in

Matt Hulett

get I'm excited to space Hey a of personally about the this to in subsequent pet There's that catching talked a been in advice. I start-ups Yeah, telehealth of really conversations. this actually forward up different had lot Ben! some to lot innovation in There's space. space. Looking

start they to prescriptions and also is, store, the try so as not the customers in is only inordinate This It a of relationships. the healthcare. customer of leaving we the us. proverbial the TAM An expert on customer, think almost are the – are evaluate. of timing always and happens expert as give we're additional in back they is way are of in They with are the the but fundamentals, the advice are from amount wanting to our because lot us way them than experience not PetMed kind giving milk permission services just I’d pet I I yet. because more store the today, the a providing customer the see the

us that with view being very services are services. because add I viewing really as that don't do media we of additional not well positioned it to And so know us as telehealth retailer customers specialty as different see today, lots you pet They pharmacy. the

customers not providing opportunity advice ways, We’re are telehealth, AutoShip engage we selling dogs, food, with small, for services. I for is for we’re not see known so selling known market for expert really the known an and really our pet in while additional then to it's unique and sell them

this talk hopefully to going a able this lot doing certainly which I'll quarter of to on next time. about we're but you even topic, to testing, announce, to nothing be So be

Ben Rose

Okay, to the I’ve veterinarians clinics this And company's of improve is you that find you that know I intriguing the and the vet the great. with you veterinarians be curious with, that know, quantify with to number the to have clinics, and was veterinarian relationships reduce work relationships to plans you community regard time or that and first with friction opportunity. heard you with an know perhaps them. to

Matt Hulett

it intentional started and thanks put Yeah was for that because I first quite surprised was company. noticing the in when I to Ben, that, there,

in space quote than and think other one vet that used seen this larger a a today. most. it might I – numbers be competitors might I've network portal have that’s we We surprise this have a

we we little been space. has when complication span in this vets with honest to first of the relationship company over our think the a be are I pioneers started, the because

other I think there's this to when to be least as in honest. friendly kind we’ve kind the and more of in veterinarian think opened are space would a them and the likely for of I go conferences, door we welcome, players we're now space player the be probably seen we and this I to think

verification rates Our ever are vet high they’ve been. as

in do can veterinarians our make we things of to lot a vet there’s easy. think the I life portal

terms sympathetic very vet a great better do think how to automate veterinarians. opportunity lot rates to have they and suicide lot be going portal to pro-vet be we're I of overworked; their that highest friend the think our I can know but to the do clinics, we're I the in any of we start, market. a we a They has of are they You there's a and approach in you profession, some what know there's to vet. of And think

Our intent is not anti-vet. to be

Ben Rose

much. thank very Okay, you

Matt Hulett

Ben. Thanks

Operator

has the our ended. remarks. Matt of the call call company's the questions-and-answers like concluding I to CEO his would portion turn And to Hulett, for back now

Matt Hulett

I want Bruce financial you. section. covered to reiterate highlights his in what Thank just

We time, engaged months disappointed with that’s growing, be two growth. the to begun personalization do To customer insights of allocation sales market more PetMed do have improve variable acquisitions our XX core playbook partners. of the leaders, calls, drive countless I've different a our a can would acquired services changes demanded and of quarter, to only and my on researched operating comprehensive business and and a customer marketing not the results weeks but already with over lot job, Since in strategy in our a much engaged to short for our of our in yet I'm our of we capital or I customers. improve needs industry that service that I'm of the already new to services; will to on future take a expanded to on call that first areas plan to base confident are improved own are be the make product data necessary there's clear, with after the allocation I've for order PetMed in In with ready better segmentation advantage analysts we seen premature. provide offers more Using pet can our listened and include market retain mass and here today's been with and trends. for pharmaceutical by customer being my main customers, spend; these business already this to business period following:

leverage of call. vision during we Operator, look the tailwinds, Board presented be firmly strategic this ends that with to and a our and more strengths today, Directors day main our plan in our coming advantage earnings I quarters on company. about do you briefing and on market say highlighted However, core large you vision strategy I and I We and conference call. a a XX we But we day for of QX take broader will the I'll the our for in. execute can that listening forward this XXX have sharing today to Thank the our you progress. believe strategy

Operator

call. conference you. ends Thank today's This

at disconnect may participation. Thank you time. your this your for You lines

PetMed Express (PETS) 26 Oct 212022 Q2 Earnings call transcript