Earnings call transcript Q4 2023

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Operator

Good afternoon, everyone, and thank you for joining the PetMed Express [Third Quarter] (sic) [Fourth 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 now yours.

Brian Prenoveau

I'd fourth welcome quarter and PetMed to operator, fiscal Express earnings you, like everybody to the Thank call. until call I everyone would the be call. conference later that remind session, listen-only will the first will also portion of in like be the question-and-answer to which this amended may and of the Also, Litigation Private that call Reform included may the within Act statements that Act during be information forward-looking number as the and XXXX Securities a Securities XXXX Exchange certain uncertainties. this of of will include involve meaning of risks as These upon statements are well us. based as available currently we on based our used beliefs have to assumptions information Because involve statements events, our and future concerning these risks, these statements current assumptions. reflect views uncertainties Actual results could differ materially from those projected. any realized. or that will There no forward-looking can be assurance occur results be contained the PetMeds. condition as future to as is be or And this matter or any to financial operations presentation business warranty should of in a or nothing relied in respect representation any matter, including upon or update other PetMeds or subsequent required regulation undertakes law, no obligation by applicable may publicly these except as events, statements legal be authority. on competent based forward-looking to

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

comparable this call, we measures Also, Reconciliations release more directly non-GAAP be are to of measures press the during financial included the issued these of GAAP the discussing course today's most the measures. will in company one or afternoon. non-GAAP financial

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

Matthew Hulett

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

update detailed our last PetCareRx; recent call: you XX following and roadmap, including of one, the our in quarterly today's on three, walking in strategic the earnings through be a results. of will our We months; financial review two, an acquisition reflections components

story, a consumer. insurance services and food, to access is anyone that Express to and and prescription the medications, supply direct PetMed vet and PetMed company pet supplements delivers non-prescription Company and provides For new the to

is parents established served as evidenced pharmacy pet the we operating an online fact our and history. brand, over XX-year by Our expert million have that company's XX trusted over

We parents pet of have value and quality. service a loyal our customer brand, base that

be trusted say, the experts. and as health live wellness pet believe Because or the to to be healthy we pet we to market long, leader is pet like health a deserves life. goal Our in happy, care every

on As mode. calls, we in rebuilding mentioned previous is a earnings PetMed

the our will be it notable transformative. products the product now expand line, sales. further The but existing have increase to deal significant completed our importantly, believe it year; a the company accomplished reconstituted have an acquisition and the new history, strategy, PetMeds recently, team a an opportunity top a management first to course and We approach provides and benefit place, We of and updated the offerings over including customers most the catalog. to capabilities acquisition the PetCareRx. past and and grow the We've great with distribution a acquisition enhanced in immediately revised of provide to and company's This we experienced the new brings market. more overall in to to represents

nose that the Vetster During this earlier capabilities Pumpkin XXXX We fiscal pet investment strategic our brand in tail. we XXXX, year. and wellness telemedicine your we believe insurance covers in Insurance our to in complete in expanded now the investment through of with in pet have a pet from April foundation

in greater will will stronger. on has some financial of go Christine our challenges change the only but transformations, overcome, later depth to in investment CFO, presentation our As annual provide to performance. and and we our us resulted that I drive these made required results overview an has with then it most quarterly have some Chambers, into had

decrease course a decline the of in fiscal began business million million of XXXX compared realize decline the were sales equating sales compared The XXXX of as XXXX. to a X%. to compared the to This to the sales stabilization $XXX year. year of over of decreased prior we rate $XXX in to Fiscal XX% year, fiscal a

of XXXX, of we quarters, help over year acquisition. the to has the coming next Now The into acquisition further growth closed, implemented we business which heading the that core will profitable into PetCareRx years. our integration from catalog, fuel the new fiscal stabilization be growth the of and anticipate several expect

more discussing want a fourth I highlights up to items. quarter bring few big before picture

focus growth new we year, were our see to customers. this in pleased been has continued As

the where increase Our growth, new quarter trend XX% customer have count the XXXX. row This breaking in net $XX,XXX, is second a of representing customer downward seen since year-over-year. we the for a approximately QX quarter was new

in with line Our customer expectations were efficacy as well. our metrics acquisition

to was in We the LTV improvements X.X%. of as CAC for saw Our revenue recurring side our quarter the continued well. business

increase our & of XX% AutoShip continues from last year. this Our at fourth program was the program during expand Save revenue an our as AutoShip to XX% quarter, from time subscription derived

in saw we retailers. work business price Returning other driven trends many across partially positive consumables. OTC aggressive The still in have past the by category year, and do. medication by and discounting year-over-year, food offset experienced While X% product over-the-counter declines online and growth this we competitor offline to declined sales in year-over-year

address the this more on call. will in We later detail

Slide X. Turning to

acquisition choices of total with tail. pet capabilities The additional vision providing the of existing thousands catalog, wellness and provides expansive more mentioned, PetCareRx is products our our provide parents. pet additional significant company from the of to add PetMeds will to nose PetCareRx to medication to I As nutrition.

shipping, same infrastructure In these other can in services. We of to One expansion maintain, not believe albeit if minimal and of human track, level big reason is leverage same can and total additional distribution we order customer components utilizing words, capital this of offering. significant a are wellness long-term the our believe our execute and opportunities existing so behind efficiency satisfaction improve, in product telemedicine insurance and while important somewhat expertise that can requirements. adoption we realizing with we due do and we believe we and expansion product

over the size Given long the overall believe have vastly currently, the amazing potential these opportunity, term. are we services of growth for underutilized and the market

Vetster or significant years. deliver foundational XX While next the our to are months, as over these X we don't with we X Pumpkin next we partnership the to revenue investments look do in believe anticipate out

We've from mentioned PetMeds teams integrating report as well, that operating there are a that across separate coming and and a the brands. I as to spend been of continue PetCareRx, processes but rapidly to lot about upside synergy sides want talking happy the we and to Employees is people have I'm together the operate team. time PetCareRx confirmed we've will integration. some behind both businesses. both of extremely

operations related integrating are However, to our we generation, shipping supplier on we distribution coordinated are that well negotiations. so critical and demand areas and

delivering this and via PetMeds the rationale pet products, addressable what a while the acquisition the space, full providing was to discussed, of market As our nose-to-tail wellness expand new medication, customers upside. Instead immediate be customers' sliver PetMed's a will we have diet our and medication just on needs of vet for call food for solution includes services. services we specialty that providing

distribution Seaboard along Additionally, States distribution Eastern to fulfillment the be capacity able efficient larger of for capacity will products. and now United we excited format having we are the access about as the

overall only wallet gain basis on pet. has of from the food. pet serviced opportunity our pet small customers' for less in purchased acquisition Medication lifetime needs portion value. resulting consumers, share than a high is more to a the their provides historically Finally, PetMeds frequent

of will customers. With offering acquisition a selling on and PetCareRx, the regular products more PetMeds be more basis to

has now and to in address expand and to partnerships able with our our customers. and we our acquisitions discussed, customers for greater a wellness With investments of never be more time, address assets space. our and relationship and parents' new as market been just care, provide attract a the and the basket selection for range product through opportunity opportunities capabilities diversified we a As us expect PetMeds pet our grow addressable PetMeds insurance, across need. is broader revenues Over there to vet our broader expand. of new existing more pet we service broader to

is $XX in market a United approximately market, pet the PetMeds out in billion of the Today, market States. $XXX a participates which billion medication

now extensive and best of the only wellness similar PetCareRx capability expand center addressable non-medication products. supplements XX,XXX With distribution also to non-medication the curating operating addressable incremental they health made important also distribution the other relationships. by They in market. investment and of their a an medications, market not PetCareRx, bring core we of food, and over supplier are acquisition carries market, medication the list products much larger incremental of including in outside

launched the Let's recurring new expanded initial of many X. and our accomplished demonstrated services. customers, revenue, differentiated the are that Slide XXXX, We our In catalog we important turn our product steps and to subscription to ability to grow fiscal transformation. increased unique the

chapter, We page to are revenue our now the turning next growth.

the the spending pet health we year next also execution, tailwinds see be wellness on tremendous in while consumable will pet We category. and market

We in a are stabilization PetMeds given the well the start this confident of as the PetCareRx great team. statement as of core integration business, the continuing to

put this. on finer a to like point I'd

We team our PetCareRx. are expeditiously non-medication and and revenue half PetCareRx' of brand, acquisition from is integrating successfully new products. Almost derived

over products We our portfolio customers similar PetCareRx to time. expansion will that confident with from several relationships quarters, these the of rapidly the PetMeds will we adding are buying PetMeds and over behavior and be see next

PetMed's premium need parent. food In traditional the real prescription and food fact, we see as a pet for

be our will and are first We we that that at to will prescription premium next launch pleased Purina partner PetMeds quarter. announce food

which prescription customer As that, understand pioneered work high-quality core efficient by how prescription process typically to PetMed ago. over you and business veterinarian, might years is We prescribed that XX is a has the similar deliver and an perfected food know, a experience. to with

launching be next catalog the will the several quarters. aspects We over PetCareRx of

size and are in leaning into direct-to-consumer In PetMed's addition, we the space. large pharmaceutical scale

agreements marketing of We Rx to which PetMeds, benefits meaningful quickly. the of management manufacturers, business from funds additional help supplier which existing PetCareRx the pharmaceutical will business all the form over the accretive cooperative migrated provides in PetCare from also the more make improved of to have PetCareRx

Christine the and in turn more over expectations detail. now to our to financial review results I'll call

Christine Chambers

provide going on I'm the last recent Matt. mentioned quarter. liability quarter this tax most Thanks, to and update discuss we an

results turn last XXXX, remarks to March the year. fourth fiscal quarter year's our results same quarterly me ending our let First, My the to XX, financial for compare will this quarter quarter.

a decrease compared were quarter X%. in sales $XX Fourth of last to million period year, the the $XX.X same sales million of

Matt excess welcomed in compared As to XX,XXX year-over-year. growth our continued in We the related this parents trend approximately net customer growth representing prior pet new XX% XX,XXX year, we new of mentioned, to quarter year-over-year.

period sales the of same year. quarter last repeat compared X% However, the to $XX decreased million for

medication a of We AutoShip the point finer category. growth recurring become online a This was across on medication Save medication market, offline with over-the-counter that from and large smaller PetMed's base. see contraction overall decrease amount OTC to flea price of continue sales, experienced industry engagement our of in percentage macro To repeat quarter seen & the this, line trends the discounting percentage greater put a last sales earlier. being sales sales. and will Matt in our as retailers. in our over-the-counter percentage of and the discussed strengthen has tick an continued This help We've total revenue. driving increasingly largest

prior total of As of was XX.X% XX% XX.X% quarter percentage percentage the compared Matt last same from XX% AutoShip as mentioned, up last the from quarter, for in year. the and the a & for last same year was and as Save period for quarter Gross XX% the to profit XX.X% as in a quarter. sales sales quarter sales

Last last quarter, year, per Compared promotions lapsed we increase deeper were customers. we that in saw on to order expenses. an also into focused leaned freight seasonal

for non-operating to increase some $X.X and related tax processes. in a tools for million accrual $XX.X PetCareRx the $X.X tax and quarter. is million year-over-year. to acquisition in This costs related fees, increased to normalized the expenses and increases year-over-year. related When expenses, G&A third-party $XXX,XXX ongoing improvement million software related increased in to the to This liability $X.X due G&A of an operating payroll our resources included million onetime advisory

We increase at fairly said, forward, we That non-operating in to the same excluding rate. continue flat items will believe being place expect largely the put look on the to not go-forward basis. team is a we G&A do G&A, and as be

of teams, As that we cost we accretive year. the through synergies end business get the standalone by on the PetCareRx integrate PetCareRx the drive to and expect will layer

committed We are take the seriously, integrity. our standards to to and our we highest transparency with operating responsibilities of and shareholders

accrued received, sales for for of assessment As I mentioned the further last fiscal quarter and quarter, received XXXX. potential tax we in second tax contingencies. a sales the on initiated process year Based the a company evaluate to the assessment

expert. tax prior additional related with liabilities. conducted to this year based have thorough a million tax sales have We an we And accrued on analysis this quarter analysis, $X.X

share $X.X or Net per loss for quarter net the share million quarter compared diluted per year. or the same for million to $X.XX diluted income fourth $X.X $X.XX of was last

This $X.X lower million tax reflects G&A in earlier, mentioned quarter gross to quarter $X for includes $X.X was lower million, per The the million $X.X EBITDA million and same I diluted $X.X equal quarter higher last million of year. dollars. accrual EBITDA adjusted the Adjusted spend share. approximately compared co-op margin the $X.XX marketing of decrease for to

Turning to Slide XX.

We a year the position. no cash cash for end, with quarter of continue and debt. on $XX million ended Subsequent cash acquisition strong balance to million fiscal the PetCareRx. of to sheet we maintain balance sheet $XXX the We and paid

year. $X.XX of payable this In returns. a As committed always, cash that are management commitment, dividend remains shareholder we June total declaring in increasing to support

We front us. policy the continue dividend as our opportunities of evaluate we assess to in growth

to the new will end recurring build that revenue and by services, food of we be organic while term, our upside will Vetster with our expanding our in to PetCareRx of broader business. our product generate year. longer catalog we effort as our a assortment share and creation the growth to differentiated meet adding the immediate organic through wallet with partnership, value more a further before and customer growing generate In the synergies business, PetMeds Pumpkin accretive consumables. from This focusing selling such will set be drive expect up expanded year, to able base core also to We to

In term, execute. mantra the to immediate is and digest our

investments management of Our and foundational in a the business. made team changes lot has to

businesses of PetCareRx acquisition completed Pumpkin, foundation to in the improvements want result a meaningful financial now those has the sure and After company. make As company for stronger these having nurtured integrated, investments, in today much the well Vetster future and that a the for we results investments success. are driving and

to to I concluding some for will Matt now prior turn the call back remarks over Q&A.

Matthew Hulett

year Thanks, pet for next fiscal Christine. company. This important be will meds for the

a base, new expect while revenue to top stabilized recurring keeping well costs our but in fixed growth show as healthy line We customers as most importantly, growth sales stable.

leverage shouldn't about active revenue that believe profitability. expect components activity on focused get long-term will lot integrating we Investors operational as hear to P&L in to expect partnerships be and company we add been inorganic of so scale. the to have growth execution our because includes our new that Management has We We the a assembled deliver late. recent investments. and

of around upcoming addressable and strategy performance. strategy For into future this tech a parents. quarter, PetMeds is premium feeling strongly growth there comfortable pursuing our a set like the solutions is We large to retailer brand. thrive that that are believe more and a room differentiated navigate market specialty We our we with pet strong for visibility as in

year, To expert. for over filled we in a we and pet As with we little our health calls, pieces expect continued pet aim an trusted program. been progress substantially AutoShip year-over-year continued pet crystal said and have you company. in build enduring, to recurring sharing those strategy clear growth & health parents' previous a be our be customer growth, We've to revenue, to see measures, have on the Save growing profitable on

now debt has we medication. More and of diversified new a customer addition, share, services excited overall now premium product insurance. wallet LTV acquisition. operate are diversification opportunities wholesale called PetCareRx catalog In expand PetMeds We to PetPlus, believe are which part of satisfaction. engagement the and our as beyond membership we more great there food about and

those good the our business. about growth one. boxes, beyond. rates for exceeding this momentum into Management now and and entire being current quarter feeling new and PetMeds we're checked have is going That We market a adding meeting

several great our progress have that over are new as We investments quarters. PetCareRx as making team integrating last made at well we other the the

We income improved coming see in that quarters. the recovering will are in revenues leverage confident investors statement with the

to with are growing prepared financial large remarks. take Operator, This now Lastly, take the our we provides us that balance ends have a flexibility of a to ready advantage sheet market. questions. strong we and

Operator

Grady [Operator question line Jefferies. the comes Our Corey first of with from Instructions]

Corey Grady

follow about and your to on wanted up tick season. comments I flea

of typical bit you So below QX, up -- that's an comp on and year seasonality. your easier last a X% sequentially it's reported quite

So And was mean quarter. much softness? that more the that contraction? impacted can maybe the other were what I there how you on the factors due add of OTC to color to any contributed

Matthew Hulett

continues decline. tick discounting Corey, yes, and as the due flea to over-the-counter a that concentration offline of as the and decline gross that higher sees percentage to side I price was has highest medication call, noted, of be indicated on obviously online was that we the the which majority and excessive was and we of And Rx less as less focused largely Conversely, season. pressure, business, discounting price the quite where that this of margins. the

for So in discounting tick. OTC we to compete not really decided price us, flea and contribute and in lower

of So explains that some Corey? decline that kind year-over-year, of

Corey Grady

right. wanted just ask about helpful. All to And dividend. the then That's I

closing PetCareRx, and earnings strategy can your quarter cash return with you're So capital about here? priorities and about you talk for this your thinking how

Christine Chambers

Cory, for the it's Christine. question. thanks And

As review our declines dividend we of wants the management signs feeling returns deliver that investors. grow always higher repeated will about growth. long over a we've that of over repeatable the business cash growing appreciation, those flow generate and to really free term, to from feel ability we the seen. the strongly the time, company -- show stock we're And on the think I basis, And to the some quarterly will

take we broader So approach it. I think we'll continue to to but evaluate a it, definitely

Operator

next of with Company. comes the & Sidoti Lebiedzinski Anthony Our line Instructions] [Operator from question

Anthony Lebiedzinski

do impact purchase the flea medication. you Was So timing influence of QX tick weather? just that from and there Obviously, a think people does noticeable on the when any follow-up sales.

that. on your So just want get to thoughts

Matthew Hulett

No on and Anthony, sales business. so weather more over-the-counter this had in terms trends the Matt, less more and price a the on so tick impact obviously. of side of the pronounced to is medication flea discounting

feeling a However, stabilization of PetMeds management PetCareRx in quarter this feels around integration. well better, we the as and are as lot better

feeling of So the good stabilization about we're PetMeds.

more business like of has the Rx And said, more I and more focused. been

haven't the we business se PetMeds. So in Rx seen per for refill trends core prescription reflected those

Anthony Lebiedzinski

you. Got

third back was you margin quarter, Okay. promotions. because going the dormant And gross to some hit reactivated then your customers with some somewhat

first so anything than that as with the ready going products customers, happened here? back customers quarter have terms seen more reactivated in halfway you and -- PetMeds? So those that actually as far as So done from of now we're those purchasing now

Matthew Hulett

Great question.

see First it of to two we continue. new been terms net had customer growth broke is that years really a customer was couple great off, we've of seen new that hadn't quarters year-over-year. trend trend that a trend a of in We for growth, sequential which net

Secondarily, a low as PetMeds platform, focused primarily prescription has Rx traditionally refill. been you engagement know, on

we And products other a good get but indicators bit so be like it's that customers see of highly to going food, the reactivated strategy. food, until premium we food was onboard early that more time prescription little to trends, a consumable are those

lastly, be to us aggressively marketing the a get us efficient little back don't discount confident as have for customers to made has And that ability to say platform. these I'd the onto we more bit

we're us about we're and spending feel So three effectively pretty combined media things back customers. where our dollars how lapsed those bringing make good

Anthony Lebiedzinski

Got you.

And of then operational PetCareRx about synergies. Okay. course talked

you about then on company that? And greater of your January, of for terms synergies how are think should can opportunity operational the original would an to you've announcement Or April, you a beginning at expand compared that? back expected operational first? now seeing since weeks for already in those acquired the So that have from few that we you in synergies,

Matthew Hulett

That's great question. a

at had that all them there like is that and is it's One of integrating across and the easier really in say. team an phenomenal. to PetCareRx We've So time a time I'd like great coordinated team three things kind the board. getting

it aspect activating of our would an call expectations. I the a most in So exceeded acquisition, terms team, which to important

that getting revenue related of advertising say things size I'd more for like like In benefits of cost in integration, and things and and revenue side on terms terms the scale cooperative think we're was there. job happening increase That doing we overall a a to more PetMeds little good our due than in scale quickly really PetCareRx, to plus bit I anticipated. maybe

the job doing at can in on which looking ways we're operations. really good cost streamline of a side, And we

different it's in So overall, we're two little pleased than have thus that terms of managed better integration. a expectations with I how maybe brands, far bit with really we going think teams two and

in PetCareRx. great PetMed embraced have to turn, see it's York really, embrace culture. the really in that really PetMeds we, So team New at And really

So we're about optimistic really, really this.

Operator

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

Matthew Hulett

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

Thank operating positively and parents to We pets. continued our look have lives that products forward roadmap, we support. you greatly pet with we go our your of and services accelerated as sharing and market change for to progress our the

Operator

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

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

PetMed Express (PETS) 22 May 232023 Q4 Earnings call transcript