PETS - Earnings call 3 2023 | PetMed Express, Inc.

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Operator

Good afternoon, everyone, and thank you for joining the PetMed Express Third Quarter Earnings Conference Call. My name is Doug, the operator for today's call. I would now like to pass the conference over to our host, Mr. Brian Prenoveau, Investor Relations. Sir, the floor is yours now.

Brian Prenoveau

I'd Express welcome Call. Fiscal and to here operator, PetMed the Third you, like everybody to today Thank Quarter Earnings

based Instructions] Also, Act those upon within can to number future will forward-looking may any assumptions upon as that representation nothing contained to Act assurance that from occur be or materially involve law, legal respect are as PetMed or of publicly financial statements update is on to Private certain a beliefs we during as the including based based Reform as [Operator future call or Securities amended, relied presentation and matter, the other no or projected. There by could us. forward-looking should business PetMed. this realized, any or statements be have may as these be uncertainties obligation current used statements currently no required and Exchange Securities reflect applicable uncertainties. be These be results Litigation risks, subsequent these a in Because events information undertakes and any as will include XXXX, may our assumptions. meaning on of authority. the condition to except matter regulation results warranty included differ or events, competent of operations statements this risks in XXXX available our of of the well forward-looking Actual involve information and statements that views these concerning

included one measures. to the these more afternoon. course today's with in Commission. Also, or annual financial associated are most the press call, comparable report filings the directly with other identified Reconciliations discussing measures of GAAP we our release of have this company financial measures be the issued operations recent factors Exchange We will the Securities during and our risk most and non-GAAP non-GAAP various in

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

Matthew Hulett

making call. the participate for in you Thank Brian. time our to earnings you, Thank today

company For prescription vet company nonprescription to consumer. food, Express medications, a delivers that the is and PetMed anyone and new supplies to PetMed services direct the and story, supplements,

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year. Third million of for of prior same the the $XX.X sales to period compared were quarter sales $XX.X million

compared decline to year-over-year this While in of year XXXX. fiscal equates a a to sales double-digit X% decrease in

the customers not acquisition achieved XXXX. that was we is net of customers since X% disciplined we of Most QX an saw in increase an that this importantly, year-over-year. This are of increase seen new One in our an new in since quarter the while terms metrics. we of have company. net the with important pleased reasons efficiency staying milestone for we customer

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was relatively value flat $XX, last order last average and to year Our quarter.

side growth business. our continued revenue saw the We also of in recurring

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a seen that will As strongly in believe pet result already consumer health of trend digitally demand, enabled, become we more have that health. we a human services

excited exclusive minority partner stake, are space. relationship our into our and telehealth about strategic very our telemedicine the virtual We that ownership and accelerated investor, entry

from PetMed trend We of designed provide through integrate going various like company call what efficacy and to the pets time, more our extensions is strategic differentiated and food the we performance of to Expect product innovations these live of that to we with high the to the benefit our would will bespoke unique, not online walk pillars. I also have over And and be outcomes to believe now and turn unlike all technology for Christine mobile seen telemedicine are healthier over other can QX you see ways. quarters happier you to in our are the delivery over from that deepen Christine? innovations slew a pet expect like financial efforts a catalog as huge lives. partnerships and to see fundamentals. services to coming services. There and

Christine Chambers

business. cash plan PetMed capabilities strong spur strong XXXX. you, on December core $XXX balance unrestricted Thank of PetMed's in over at a million XX, that of a growth PetMed the as has of assets Matt. maintains to leveraging set we sheet and

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customers, puts satisfaction NPS us and a the quartile and the score go guarantee to which Our is over upper mile in with we service. of alongside in world. the beloved the most XXX% XX, brands expert some provide empathic We our extra genuine,

G&A AutoShip continues Matt This grow quarter. to expand. our third mentioned, also a provided decision-making program smarter business and at the really that previously recurring Investment XX% during we've sequential which in I'm revenue basis. to excited As X% AutoShip of program speed is I was Approximately see better with our want to has increase revenue subscription derived from an transparency, on and improvements. begun the analytics. greater say our

the quarterly XXXX, year. to December third turn our results compare XX, remarks year's me will to this our ending the quarter Let financial quarter same quarter fiscal XXXX. My for last results

in revenue same year. million revenue compared last quarter million period $XX.X of to $XX.X the was Third

X%, is there's quarter growth. this in highlight, over quarter year-over-year XX% This approximately an net We growth to in customer to important increase the XX,XXX of represents year. X% parents of While of decrease milestone new and sequentially. prior prior an XX,XXX compared the a this welcomed XX,XXX and pet new

to Gross the in new the quarter repeat for acquisitions. Repeat year. to acquisition X% million actively quarter. period higher of sales the XX.X% throughout promotions the competitive consistent primarily of year decreased seasonal $XX customer XX.X% $XX the as sales percentage million sales same and have to prior profit in XX.X% in was the targeted lapsed compared decline The last to due through profit of in gross the quarter during promotions in industry. of compared as was customers We quarter a same drive last quarter

this lean however, in additional was large our marketing more activity, we and lapsed With fully on team, refreshed promotional into Our base cross-sell a will catalog customers. future. these marketing optimizing reactivating and the expect focused to modern to specifically base stack customers customer of

this that transaction, to payroll of an million pending to million to other always due some $XXX,XXX $X.X offered increased software is for related increase we the stock when normalized quarter in increases $X.X compensation. don't we nonoperating set. G&A but evaluating the G&A the specific customer our $X.X to related million to promotions PetCareRx to deep expect While expenses, we're G&A. includes This related year-over-year. repeat relating year-over-year, which the past to increased promotional strategies, and $XXX,XXX costs and resources reengage third-party expenses

see G&A at acquisition initiated in rate right for push this accrued quarter, Based largely and With result XXXX could fairly tax We in Please to tax an we potential company's increase do will The G&A exiting to the evaluation the will as a now year additional year. team process we company fiscal be of assessment forward. fourth the the XXXX. received the the financial the to on to flat the received, on going of sales quarter exclusion expect same second the the evaluate items, continue fiscal of a that statements. acquisition-related further have note in impact a believe place we and expenses. We material sales close contingency. year the for expect not next nonoperating is assessment to fiscal

the was not the year. last per diluted the Adjusted a complete same further in We $X.X our $XXX,XXX year. operations. will expect third share was reflects update for and million includes margin million ending per and decline same EBITDA per quarter XXXX, in and gross income last we to for items analysis. Net $X.X full for for complete $X.XX or is and decline to of we March diluted in year-over-year compared share after quarter G&A. targeted $X.XX indicative quarter a share our in increases $X.XX to quarter The the quarter review compared the This XX, $X.X provide the breakeven ongoing million diluted or

over As and and returns inorganic investments look on drive to integrating the Management we future last forward. are paramount primarily and organic forward, that on focused being the those the to focused believes going and year investments. business Therefore, is recent in operating growth order closing we'll driving on returns. we've the the pending execution be realize acquisition made that long-term sustainable integration sufficient in

million, We've talk reiterate January, acquisition. Analyst trailing customers, to more Total a about of million, the and in the same covered the located to we'd margins brands like but Day York XXX,XXX transaction. of headquarters in XX-month material pending consideration gross and revenue XX,XXX of PetCareRx PetMeds. and like I'd our $XX center rationale Now SKUs, structure the and this in some $XX strategic than around distribution New XX as Long Island, product approximately and employees for

As expect quarter. this we to mentioned, close deal the

as While part consumables wellness synergies the expect time, will to continue as PetMed's line bottom revenue it's the immediately streamline top deliver be and PetCareRx of independently accretive expected we operate to we brand line infrastructure. and to Over leverage business, it growth.

our to allocation. Now discuss like capital I'd

business, sell our As in the ability of PetMed's more to as to that as the we acquisition more well growth products we transform base. work to first provides variable the PetCareRx marketing as immediate customer is the catalyst spend

long to committed run, management remains driving shareholder total return. Over the

quarters as normal declaration the $X.XX As Consistent a part business same with per we have the cycle. quarterly will on prior basis at prior such, of we evaluate dividends pay the a share. our at Board practice, in rate third quarter, dividend quarterly of as the will for

the with a back market. And higher investors strongly see in call I'll believes stock with term growing the management company that turn over that, appreciation addition, a In growing to long Matt. return through will a

Matthew Hulett

quarter is the well management by for acceleration business drivers. performance the Again, this very growth. of in poised Christine. Thanks, PetMed as encouraged impressive the today long-term business announced We is as the that

pet As experts. trusted is strategy. stated aim quarters, specialty pet health parents we have retailer PetMed to over vertical last the We a be several pursuing

growing and strategy net the health pet a an sharing profitable We company. To new year, crystal substantially to measures for more and our revenue. little have customer subscription we a been enduring, pieces the in success, you on have be with clear for filled over growth, build

veterinary rapid predictable seen model. health and enables to nonmedication services differentiated a continue we'll Sell have more catalog expansion. PetMed We via here, be care more care. progress and via products business Unique digital-based to business see product services that recurring more and

we that is to services virtual a continue are and add and wellness contribute and the economic well-known in that or brand, we greater market operate over customer will to resilient to more less churn uniqueness market. With million X and care loyalty We customers, in trusted headwinds. a will unique

balance provides that large us strong a sheet to and flexibility with market. have advantage the We take of growing financial a

welcome PetCareRx. to our excited not done. certainly job PetMed's are members, is new pet We

initiatives. This hard our to working with assets these and be ready will remarks. questions. are now Operator, to We to go take ends execute we integrate, prepared market and new

Operator

first comes question the Wright Morgan Stanley. with from Erin Our of line

Erin Wilson Wright

an about in congrats that on First, hit factors be Or you we how should any quarters? growth should that in terms there about and the progression? about thinking are inflection we think thinking how thinking should -- here? that Do of new customer quarterly be but new we've be other the point we growth, customer coming

Matthew Hulett

interesting I'll a X.X new couple behind years. of the pretty Thanks first take in time for What going we number. Erin. that until have on one saw a for the net -- got that things and PetMed of a -- about customer that one. about. growth that excited Yes, question, the really we've are we're talk of is didn't lot versus recently, business huge that early-stage we One database is up to to an things customers

done much of a customers. reengaging we've better So lapsed job

we may new of the changed to our with us you customers that's X anyone years. definition the recall, purchased in last As

our offers targeted largely specific as which acquisition efficient, lapsed base, And we to found customer CAC so very we're being have customer doing more efficiency.

Erin, you'll theme of So the see that's us. future, from in that one kind

both catalog, as second of in around our of lifetime we net see the our terms terms products heard you value is on, is in trends, an existing. also increase while more theme CAC but bringing thesis customers little bit around a -- the overall to generally nonmedication The opportunity space do of PetCareRx and to we flattened what expansion start new in we as trends that CAC selling are of the

I the reuniting from you'll those getting us lapsed but related that probably less margin customers, trends to of terms customers think hit more more us. are on purchase So gross in from to see focused

on And go-forward leaning we hope about our ability so basis, a question. our are I optimistic answers that base. customer your grow more to

Erin Wilson Wright

some underlying trends environment upcoming tick you're just Great. Yes. looking of that across from macro seeing then demand in whether you No, an was and And color. around underlying customer terms dynamics? great base this your what consumer also at the What behavior it's dynamics trade flea of around just demand seeing sort down perspective? season, in are

Matthew Hulett

it's great Erin, us. such question question, important a that's and an Yes, for

seasonally are the tick driven season. highly we flea know, business, weighted you As towards a and

not it's and going season I is than think think to I -- different this season. be very last

cold. I vectors. very was unseasonably think was different very abnormal season It many on last

in supplier looking are and channel our macroeconomically seeing what the very at vet carefully partners. we're We with also

are We flea much the it than last that better optimistic cautiously be season will was year. and tick

data. very difficult colder but going macro the temperatures early would year, see but I we say very we're all to did don't tell. worse, would to be think I it it think you're as to it's to attuned But as staying too last be

trade trade of we our not seeing are down behavior business. terms in In down,

and stick favorite or customers, don't that will the it's of know, brands will brand we for And tick a And in And I relatively business. focused it resilient, particularly news in trend weighting seen you if of and skin haven't are good flea with the trade brand. diet is, behavior. that we're customers, generally and down love, very wanting see likely those As they would us. we consumers recessionary very down, our whether say focused health-focused we and their Whatever which terms prescription lot trend to is a medication continue.

tick, be going macro, seasonality flea sales for very answer that focused. watching to temperatures. Did increased stay very March, carefully we'll terms that's and your into get and in So historically Obviously, of the we around Erin? question, as we're around have when

Erin Wilson Wright

Appreciate Yes. it.

Operator

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

Corey Grady

follow wanted growth. on just impact to that other talk factors I that customer and up about

and So we've kind quarter weak seasonally the seen and year flea vet past industry is for this tick. over down of visits a

might about customers. So that market and how customers customer Maybe by the lapsed thinking of year? terms over can like about next you impact added you're in customer growth what you're in activating talk you the seeing intent, trends

Matthew Hulett

a great question. That's

In reignite customers, really, the changed terms That's new lapsed of the existing a the of that's we definition. conversation. why

a have got, and what, those what there's want huge data PetMed. brand opportunity a customers new net from of like, in lot interesting We what around we've a

way about And new so we it's almost having think the as it a completely conversation.

Some customers of to strong a while. but us to affinity, been actually really brand, a obviously, the have introduced haven't in those they

we've speculation to get of a versus treating concerns. going in place And to is like retailers. pre-recessionary shop, your needs they other inflationary to and That one developing place get to this in new be we're more so e-commerce And of them It they're all want seen this a could to their item. But could be products related concerns. because one-stop theme, seem customers are new one just are new customers. one those that customers

components predict strategy terms customer well those existing as the as In increase net the customers we've overall in new the in the it's to of but certainly of trends. both hard terms trends new, dynamic for It's customer marketplace, a flatten to seen acquisition acquisition.

add premium thesis basis mix. the costs been to and like of for interesting acquisition food demand, premium lot have which on food PetCareRx to see absolute more the customer flat. relatively products prescription a an is we But Our

position costs our so that customers more yet. we into a And customer rapidly, longer term, we not are and in acquisition see to opportunity expand but potentially lead comment on an again, to

very working We I digesting haven't with focus acquisition closed much answer question? and your on that PetCareRx, team and executing. Corey, did the we'll of

Corey Grady

helpful. Yes, did. That's you really

wanted get margin. color to I some follow-up, gross on just my For more

about on going talked less and cross-selling, QX margin and year? more gross forward, you should on next promos how So focusing into but think for about we

Matthew Hulett

would that Thanks, answering Christine, mind you question? Corey.

Christine Chambers

the for question. Corey, Thanks, Yes.

really impacted was an with was products our on to of because we by those lean That customers, So basket did promotions. forward. that of customer's the part really see as some that cross-selling of onetime margin the lapsed those going of and gross opportunity and sort into quarter intentional on of call, the that the with acquire our mentioned the move I sort customers targeted acquisition of portion expanding the we in

also, As can we rebates there often I was those -- -- hit was our there vary of goods some and have that, mentioned, sold, that from say that cost would and there's co-op quarter-to-quarter. I

impacted gross Now things margin. both of negatively those

don't to really repeat expect going forward. we those quarter, to extent This that

do we to see kind the in expect seen so margin the past. that with line our gross in we've And trends historic of more

Operator

question of & the Anthony Sidoti next with from comes Our Lebiedzinski line Company.

Anthony Lebiedzinski

to quarter here. So growth it's see sales in really order nice new the

Your or reorder sales repeat about down sales X%. were

kind forward, around total expect going of mean, I -- drive of obviously, revenue. sales mean did your repeat you I So XX% your

perhaps customers? you sure about to thinking you're that are maintain customers? that, how that you promotion least more thinking able about repeat of broadly base maintaining just making how to you those customers? at be So those repeat expect are Do to Or

Matthew Hulett

strategy and why then the Christine answer. for returning don't answer Anthony, trends, overall that with I'll you you revenue up follow thank maybe -- a Yes. question. Christine,

Christine Chambers

Yes, question. that sounds great. Anthony, great

at returning the year-over-year. look we decline see we you're that did customers, X% right, as So

within that the X contextually decline that seen, than X I like at quarters. seen lowest that's look you we've last last say, quarters, over If the year-over-year the we've

catalog, of there the see less sort base. as trends the of customer and starting we're actually, decline course, really and the building do about starting -- in know to the new of he'll acquisition customer some see expanded repeatability that I having Matt change funnel as we stickiness. repeat we drive So back of then, a here. program And to really as hand AutoShip thinking some opportunity well to and to because comments see top a of that I'll the that greater our then additional with have having

Matthew Hulett

couple around primarily, lot elements No, was going our we to customer that Christine. meaning actually Anthony. with a you customers added answered would I refills. is don't Thanks, engagement you that -- a today, of shots prescription our say a over goal add, year I of on have

to retailer engage they're either to customers with some and that not with actually or on of for type And another not go so us. reengagement us that gives have ample program forget and opportunity likely

looking punch products those is kind selling AutoShip, We products. customers in but a more from because more market, is us. competition through more that think in want to engagement also with we're to question answer so of products customers through our And get there more one-two also more AutoShip but the selling

how pet on And over that a of all that really place telemedicine see pet the how really returning a aligned focus more stabilize through I as not the it's will just your with to so and you'd on why And but PetMed telemedicine, and regulatory interesting service. your so view things really is but that then place mentioned, to term, we also X we've help they think, with base going also I've be customers how, get we as investments changes, about get the speculative customers other very connecting those to their vet to to made think the get. And our environment our think time. are vet, long services meds, live bolster which expect advent over much are and

for another meaningful we services to for So time, churn provide a experience our ability customers. us through going is and think lower be to over more differentiation

Anthony Lebiedzinski

your was Got it. up And then spending advertising X%.

changes now? economy your the where in given are ad just I right seeing kind any you of is thoughts on Just get rates, to that. wanted wondering,

Matthew Hulett

obviously, a was which that we that supplier from how say Anthony, fluctuations of take an get partners, are when seen good increase. bit our I Yes, incented there one, largely, question. I'll little flat, variance. adds some No, the Yes, Christine, relatively we've

and on fluctuation the we're concerned of our like about can changed we've flat. when inside been but environment, the the based relatively it of CPMs, variances industry, costs, we it whether now. be spend that look lot we're acquisition has our from terms or but we that the on macro through a see customer in There what can So not some marketing seeing feel has super CPCs overall, from base amount stabilized That discounts usually of partners, right at P&L supplier price significantly somewhat change not overall, it's in quarter-over-quarter that. our we flow and

Operator

to the the I'd questions There closing in to are remarks. no hand management queue. for back like call further

Matthew Hulett

with opportunity call laying I'm results unparalleled. innovative and we've to the our joining foundation are operating reputation for value. PetMed's meet will future you the along ways that improved Thank that been lead today. market will confident in the for PetMed we shareholder envision unique increase expertise and and brand and

progress parents positively for pets. of the We our changing in you our Thank forward roadmap, we pet sharing your lives look have and and support. continued operating accelerated greatly our to

Operator

today's this gentlemen, teleconference. conclude your for you does participation. and Thank Ladies

have may disconnect day. wonderful time, lines your this You and a at

PetMed Express (PETS) 6 Feb 232023 Q3 Earnings call transcript