Financial Data and Key Metrics Changes - Third quarter sales were $58.9 million, a decrease of 3% compared to $60.7 million in the same period last year, which is an improvement from a double-digit decline in fiscal year 2022 [15][27] - Net income was breakeven for the third quarter, compared to $4.3 million or $0.21 per diluted share for the same quarter last year [31] - Adjusted EBITDA for the quarter was $2.7 million, down from $7.6 million in the same quarter last year, reflecting a decline in gross margin and targeted increases in G&A [31] Business Line Data and Key Metrics Changes - The new customer count for the quarter was approximately 72,000, up from 66,000 in the prior year, marking a 9% year-over-year increase [6][48] - Approximately 42% of revenue was recurring revenue derived from the AutoShip subscription program during the third quarter, which is an 8% increase on a sequential basis [26][36] - Repeat sales for the quarter decreased 4% to $53 million compared to $55 million in the same period last year [28] Market Data and Key Metrics Changes - The company operates in a growing addressable market, with expectations for revenues to become more diversified as it addresses a broader range of pet parents' needs [18][40] - The pet health services market is expected to become more digitally enabled, similar to trends seen in human health [24][40] Company Strategy and Development Direction - The company is transitioning from being a leading pet medication retailer to becoming a market leader in pet health care expertise, aiming to be the go-to destination for holistic health and wellness [7][14] - The pending acquisition of PetCareRx is seen as a significant opportunity to expand the product catalog and increase customer engagement in the non-medication space [8][21] - The focus on total wellness will allow the company to offer a wider range of products and services, including diet and health-focused items [10][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in the pet space, which has proven resilient even during recessionary times [9][55] - The company is focused on closing and integrating the pending acquisition while driving returns on recent investments, believing these efforts will lead to long-term sustainable growth [52][53] - Management is encouraged by the performance of the business and the acceleration of long-term business drivers, emphasizing the importance of net new customer growth and subscription revenue [55][56] Other Important Information - The company maintains a strong balance sheet with over $102 million of unrestricted cash as of December 31, 2022 [25] - The company has a high Net Promoter Score (NPS) of over 80, indicating strong customer loyalty [26] Q&A Session Summary Question: How should we think about new customer growth in the coming quarters? - Management is excited about the net new customer growth for the first time in 2.5 years, attributing it to better engagement with lapsed customers and targeted offers [60][61] Question: What are the underlying demand trends across the customer base? - Management is cautiously optimistic about the upcoming flea and tick season, expecting it to be better than last year, and noted that there is no significant trade-down behavior among customers [65][67] Question: What factors impact customer growth and intent? - Management highlighted the opportunity to engage lapsed customers and the trend of customers preferring a one-stop shop for their pet needs [72][75] Question: How should we think about gross margin for Q4 and into next year? - Management indicated that gross margin was impacted by targeted promotions for customer acquisition but expects margins to align more with historical trends going forward [78][89] Question: How are you thinking about maintaining the repeat base of customers? - Management is focused on increasing engagement through the AutoShip program and expanding the product catalog to enhance customer loyalty [83][88]

NASDAQ: PETS Safe Harbor & Non-GAAP Measures 2 Your Trusted Pet Health Expert 3 VISION Every pet deserves to live a long, happy, healthy life Corporate Overview Vision: Founded in 1996, PetMeds is "Your Trusted Pet Health Expert" providing fast, easy and helpful service to over 11 million customers across the U.S. Company Highlights • Closed acquisition of PetCareRx in April 2023 • Strategic Initiatives in Pet Telemedicine (Vetster) and Pet insurance (Pumpkin) • AutoShip & Save increased to 44% of total rev ...

PetMed Express, Inc. (NASDAQ:PETS) Q4 2023 Earnings Conference Call May 22, 2023 4:30 PM ET Company Participants Brian Prenoveau - IR, MZ Group Matthew Hulett - President & CEO Christine Chambers - CFO Conference Call Participants Corey Grady - Jefferies Anthony Lebiedzinski - Sidoti & Company 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 t ...

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) PetMed Express is a leading direct-to-consumer pet pharmacy, expanding its product and service offerings through acquisitions and strategic partnerships in pet insurance and telemedicine - PetMeds is a leading nationwide direct-to-consumer pet pharmacy and online provider of pet medications, food, supplements, supplies, and vet services for dogs, cats, and horses[13](index=13&type=chunk) Pet Spending in US (2022) | Metric | Value | | :----- | :---- | | Pet Spending in US (2022) | $136.8 billion (11% increase YoY) | | Veterinary Care & Rx Medications (2022) | $35.9 billion (26% of total pet spending) | | Estimated Pet Medication Market | ~$13 billion | | Dog & Cat Population | ~111.6 million | | Households with a Pet | ~66% | - Acquired PetCareRx in April 2023 for approximately **$36.0 million** in cash, adding a **10,000-item catalog** and **286,000 customers**[21](index=21&type=chunk) - Formed a strategic partnership with Pumpkin Insurance Services in February 2023 to offer co-branded pet insurance products, expected to be available in fiscal year ending March 31, 2024[22](index=22&type=chunk) - Entered a multi-year exclusive partnership with Vetster Inc. in April 2022 for veterinary telehealth services, becoming the exclusive e-commerce provider on Vetster's platform in the US and investing approximately **$5.0 million** in Vetster[23](index=23&type=chunk) - The company's growth strategy includes leveraging its brands, expanding product and service offerings, growing its customer base, and pursuing strategic partnerships and acquisitions[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) Sales Channel Contribution | Sales Channel | Fiscal 2023 Contribution | | :------------ | :----------------------- | | Internet (website & mobile apps) | 86.4% of total sales | | Customer Support Center (toll-free) | 13.6% of total sales | - AutoShip subscription program generated approximately **44% of sales** in Q4 FY2023, up from **30.9%** in Q4 FY2022, with a goal of **50%** for FY2024[30](index=30&type=chunk)[177](index=177&type=chunk) Customer Metric | Customer Metric | Fiscal 2023 | Fiscal 2022 | | :-------------- | :---------- | :---------- | | New Customers Acquired | ~274,000 | ~325,000 | | Average Purchase Value | ~$93 | ~$93 | | PetCareRx Acquired Customers | ~286,000 (as of filing date) | N/A | - PetMeds holds numerous trademarks including "America's Largest Pet Pharmacy®" and "1-800-PetMeds®", and acquired the PetCareRx® trademark and domain name[47](index=47&type=chunk)[48](index=48&type=chunk) - The company is licensed as a community pharmacy by the Florida Board of Pharmacy and regulated by 49 other state pharmacy boards, the District of Columbia, U.S. Virgin Islands, DEA, FDA, and EPA[49](index=49&type=chunk)[50](index=50&type=chunk) - As of May 23, 2023, PetMeds had **302 full-time employees**, with **78 employees** added from the PetCareRx acquisition[58](index=58&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from regulatory non-compliance, veterinarian resistance, supply chain dependencies, cybersecurity threats, internal control weaknesses, and intense market competition - Regulatory risks include potential failure to comply with state/federal regulations, leading to sanctions or loss of pharmacy licenses, especially in key states where **50% of sales** are concentrated (CA, FL, TX, NY, PA, NC, GA, VA)[65](index=65&type=chunk)[66](index=66&type=chunk)[76](index=76&type=chunk) - Business risks encompass challenges in managing a **15,000 SKU inventory**, potential resistance from veterinarians discouraging online purchases, and dependence on **six key suppliers** for **68.5% of products** in fiscal 2023[71](index=71&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[79](index=79&type=chunk)[253](index=253&type=chunk) - Operational risks include potential disruptions to shipping arrangements, the need to maintain high customer service quality, and liability exposure from website content[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Technology and data security risks involve potential failures or misuse of information systems, cybersecurity incidents (including lack of cyber insurance), and disruptions during migration to new IT platforms[88](index=88&type=chunk)[91](index=91&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Compliance risks related to privacy, data protection, marketing, and advertising laws (e.g., CCPA, CPRA) are evolving, potentially increasing costs and limiting customer acquisition strategies[96](index=96&type=chunk)[101](index=101&type=chunk) - Operating results are difficult to predict due to seasonality, economic conditions impacting consumer spending, and challenges in integrating acquisitions and strategic partnerships[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk) - Financial risks include payment-related issues and a material weakness in internal control over financial reporting due to inadequate segregation of duties over manual journal entries[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Industry competition from veterinarians and online/traditional retailers, along with product recalls and health crises, could adversely affect business and financial performance[121](index=121&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Securities risks include stock price fluctuations, potential litigation, and the ability of the Board to issue preferred stock or change dividend policy, which could dilute common shareholders' interests or deter takeovers[127](index=127&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[132](index=132&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) PetMed Express owns its main offices and distribution center in Florida and leases additional facilities in New York for operations after the PetCareRx acquisition - Owns principal executive offices and distribution center in Delray Beach, Florida, consisting of approximately **185,000 square feet** across two buildings[132](index=132&type=chunk) - Approximately **48%** of the Delray Beach property was leased to two tenants with a remaining weighted average lease term of **2 years** as of March 31, 2023[132](index=132&type=chunk) - Assumed leases for two PetCareRx facilities in Lynbrook, New York, totaling approximately **35,000 square feet**, used for shipping, fulfillment, and executive offices, with leases expiring in April 2027[133](index=133&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company is routinely involved in various legal claims and lawsuits, but management believes current proceedings will not materially affect operations or financial statements - Involved in routine claims and lawsuits concerning products, warranties, contracts, employment, intellectual property, consumer protection, and pharmacy/regulatory matters[134](index=134&type=chunk) - Management believes that none of the current claims and suits are reasonably likely to have a material adverse effect on operations or consolidated financial statements[134](index=134&type=chunk) - Legal costs related to these matters are expensed as incurred[134](index=134&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to PetMed Express, Inc - Not applicable[135](index=135&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) PetMed Express common stock trades on NASDAQ, consistently pays quarterly dividends, has a share repurchase program, and its stock performance lagged key indices over the past five years - Common stock is traded on the NASDAQ Global Select Market under the symbol "PETS"[138](index=138&type=chunk) Shareholder Information (as of May 23, 2023) | Metric | Value | | :----- | :---- | | Holders of Record | 134 | | Beneficial Holders | ~48,300 | | Common Stock Outstanding | 21,170,977 shares | - Paid regular cash dividends every quarter since August 2009, totaling **$25.3 million** (**$0.30 per share** per quarter) in fiscal 2023 and **$24.8 million** (**$0.30 per share** per quarter) in fiscal 2022[139](index=139&type=chunk) - The Board declared a quarterly dividend of **$0.30 per share** on May 22, 2023, payable June 12, 2023[140](index=140&type=chunk) - No shares were repurchased during the quarter and fiscal year ended March 31, 2023, with approximately **$28.7 million** remaining under the share repurchase program as of March 31, 2023[141](index=141&type=chunk) Five-Year Cumulative Stock Performance (March 31, 2018 = $100) | Index | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :------------------- | :----- | :----- | :----- | :----- | :----- | :----- | | PetMed Express, Inc. | 100.00 | 56.52 | 75.15 | 95.03 | 72.77 | 48.61 | | NASDAQ Composite | 100.00 | 109.43 | 109.01 | 187.54 | 201.33 | 173.03 | | SIC Code 5912 | 100.00 | 107.33 | 97.87 | 150.44 | 171.55 | 155.60 | | Russell 2000 | 100.00 | 100.67 | 75.39 | 145.19 | 135.35 | 117.85 | Equity Compensation Plan Information (as of March 31, 2023, in thousands) | Plan Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price | Securities remaining available for future issuance | | :--------------------------------------------------- | :---------------------------------------------------------------- | :------------------------------ | :------------------------------------------------ | | 2015 Outside Director Equity Compensation Restricted Stock Plan | 69 | — | 502 | | 2016 Employee Equity Compensation Restricted Stock Plan | 684 | — | 40 | | 2022 Employee Equity Compensation Restricted Stock Plan | — | — | 1,000 | | **Total** | **753** | **—** | **1,542** | [Reserved](index=23&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales decreased by **6.1%** in fiscal 2023 to **$256.9 million**, with net income declining **98.9%** to **$0.2 million** due to higher costs and competitive pressures, despite maintaining strong liquidity - PetMeds is a leading nationwide direct-to-consumer pet pharmacy, marketing products through websites, toll-free numbers, and mobile applications[150](index=150&type=chunk) - Internet sales accounted for **86.4% of total sales** in fiscal 2023, up from **84.2%** in fiscal 2022[152](index=152&type=chunk)[156](index=156&type=chunk) - The company changed its definition of a new customer on April 1, 2022, to include anyone who has not ordered over the past thirty-six months[156](index=156&type=chunk) - Critical accounting policies include revenue recognition (control transfers at shipment), inventory valuation (lower of cost or net realizable value), and expensing advertising costs as incurred[154](index=154&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk) - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operating performance, excluding share-based compensation, depreciation, income tax, interest, and other non-operational expenses[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) Key Financial Performance Metrics (as % of Sales) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------ | :----- | :----- | :----- | | Sales | 100.0% | 100.0% | 100.0% | | Cost of Sales | 72.4% | 71.4% | 70.9% | | Gross Profit | 27.6% | 28.6% | 29.1% | | General and Administrative | 19.3% | 11.3% | 9.1% | | Advertising | 7.6% | 6.9% | 7.0% | | Depreciation | 1.4% | 1.0% | 0.8% | | (Loss) Income from Operations | (0.7)% | 9.4% | 12.2% | | Net Income | 0.0% | 7.7% | 9.9% | Adjusted EBITDA Reconciliation (in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Net Income | $233 | $21,100 | $(20,867) | -99% | | Share-based Compensation | $6,617 | $4,549 | $2,068 | 45% | | Income Taxes | $1,351 | $5,971 | $(4,620) | -77% | | Depreciation | $3,546 | $2,738 | $808 | 30% | | Interest Income | $(2,070) | $(335) | $(1,735) | 518% | | Acquisition/Partnership Transactions | $1,904 | — | $1,904 | n/m | | Employee Severance | $364 | — | $364 | n/m | | State Sales Tax Accrual | $7,825 | — | $7,825 | n/m | | **Adjusted EBITDA** | **$19,770** | **$34,023** | **$(14,253)** | **-42%** | Sales Performance (in thousands) | Category | FY2023 Sales | FY2023 % | FY2022 Sales | FY2022 % | $ Variance | % Variance | | :--------- | :----------- | :------- | :----------- | :------- | :--------- | :--------- | | Reorder Sales | $232,633 | 90.6% | $244,505 | 89.4% | $(11,872) | -4.9% | | New Order Sales | $24,225 | 9.4% | $28,912 | 10.6% | $(4,687) | -16.2% | | **Total Net Sales** | **$256,858** | **100.0%** | **$273,417** | **100.0%** | **$(16,559)** | **-6.1%** | | Internet Sales | $221,894 | 86.4% | $230,263 | 84.2% | $(8,369) | -3.6% | | Call Center Sales | $34,964 | 13.6% | $43,154 | 15.8% | $(8,190) | -19.0% | | **Total Net Sales** | **$256,858** | **100.0%** | **$273,417** | **100.0%** | **$(16,559)** | **-6.1%** | - New customer acquisition decreased from approximately **325,000** in FY2022 to **274,000** in FY2023, with advertising cost per new customer increasing from **$58** to **$71**[174](index=174&type=chunk)[183](index=183&type=chunk) - AutoShip program sales increased to **44.4% of net sales** in Q4 FY2023, up from **30.9%** in Q4 FY2022, with a goal of **50%** for FY2024[177](index=177&type=chunk) - Gross profit decreased by **$7.1 million** (**9.0%**) to **$71.0 million** in FY2023, with gross profit margin declining to **27.6%** from **28.6%** due to lower sales and increased per order freight expense[181](index=181&type=chunk) - General and administrative expenses increased by **$18.6 million** (**60.5%**) to **$49.5 million** in FY2023, driven by higher payroll (**$5.8 million**, including **$2.1 million** stock compensation and **$0.4 million** severance), professional fees (**$1.9 million**), software/systems (**$1.0 million**), a **$7.8 million** sales tax accrual, and **$1.9 million** in acquisition-related expenses[182](index=182&type=chunk) - Net income decreased by **$20.9 million** (**98.9%**) to **$0.2 million** in FY2023, primarily due to decreased sales, lower gross profit, and increased operating expenses[187](index=187&type=chunk) Liquidity and Capital Resources (in thousands) | Metric | March 31, 2023 | March 31, 2022 | Change ($) | | :-------------------------------- | :------------- | :------------- | :--------- | | Working Capital | $95,000 | $117,800 | $(22,800) | | Cash and Cash Equivalents | $104,086 | $111,080 | $(6,994) | | Net Cash from Operating Activities | $27,803 | $18,498 | $9,305 | | Net Cash Used in Investing Activities | $(10,260) | $(1,752) | $(8,508) | | Net Cash Used in Financing Activities | $(24,537) | $(24,384) | $(153) | - Working capital decreased by **$22.8 million**, primarily due to lower income and cash used for the **$5 million** Vetster investment and **$5.3 million** in property and equipment additions[202](index=202&type=chunk) - Acquisition of PetCareRx for approximately **$36.0 million** in cash closed on April 3, 2023[205](index=205&type=chunk) [Executive Summary](index=27&type=section&id=Executive%20Summary) PetMed Express is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies, and vet services - PetMed Express is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies, and vet services[150](index=150&type=chunk) - The company markets through its websites, toll-free numbers, and mobile applications, with approximately **86.4% of sales** generated via the Internet in fiscal 2023[150](index=150&type=chunk)[152](index=152&type=chunk) - The average purchase remained approximately **$93 per order** for fiscal years ended March 31, 2023, and March 31, 2022[152](index=152&type=chunk) [Critical Accounting Policies](index=27&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies include revenue recognition at the shipping point, inventory valuation at the lower of cost or net realizable value, and expensing advertising costs as incurred - Revenue is recognized when control transfers to the customer at the shipping point, with outbound shipping and handling fees included in sales[154](index=154&type=chunk)[155](index=155&type=chunk) Sales Disaggregation (in thousands) | Category | FY2023 Sales | FY2023 % | FY2022 Sales | FY2022 % | | :--------- | :----------- | :------- | :----------- | :------- | | Reorder sales | $232,633 | 90.6% | $244,505 | 89.4% | | New order sales | $24,225 | 9.4% | $28,912 | 10.6% | | Internet sales | $221,894 | 86.4% | $230,263 | 84.2% | | Call center sales | $34,964 | 13.6% | $43,154 | 15.8% | - The definition of a new customer was changed on April 1, 2022, to include anyone who has not ordered over the past thirty-six months[156](index=156&type=chunk) - Inventory is valued at the lower of cost or net realizable value using a weighted average cost method, with an inventory reserve of **$48 thousand** at March 31, 2023 (down from **$81 thousand** in 2022)[160](index=160&type=chunk)[161](index=161&type=chunk) - Advertising costs (Internet, direct mail/print, television) are expensed as incurred or when distributed/televised[162](index=162&type=chunk) - Income taxes are accounted for under ASC Topic 740, recognizing deferred tax assets and liabilities based on temporary differences[163](index=163&type=chunk) [COVID-19 and Other Macroeconomic Factors](index=29&type=section&id=COVID-19%20and%20Other%20Macroeconomic%20Factors) The COVID-19 pandemic and macroeconomic factors like inflation and potential recession indicators continue to create volatility and uncertainty, impacting the global economy - The COVID-19 pandemic and macroeconomic factors like inflation and potential recession indicators continue to create volatility and uncertainty, impacting the global economy[164](index=164&type=chunk) - The company monitors these effects and takes steps to mitigate impact, but the future nature and extent of the impact remain difficult to predict[164](index=164&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) The company's fiscal 2023 results show a **6.1%** sales decrease and a **98.9%** net income decline, driven by higher operating expenses and reduced gross profit margins Operating Data as a Percentage of Sales | Metric | 2023 | 2022 | 2021 | | :------------------------ | :----- | :----- | :----- | | Sales | 100.0% | 100.0% | 100.0% | | Cost of sales | 72.4% | 71.4% | 70.9% | | Gross profit | 27.6% | 28.6% | 29.1% | | General and administrative | 19.3% | 11.3% | 9.1% | | Advertising | 7.6% | 6.9% | 7.0% | | Depreciation | 1.4% | 1.0% | 0.8% | | (Loss) income from operations | (0.7)% | 9.4% | 12.2% | | Total other income | 1.2% | 0.5% | 0.5% | | Income before provision for income taxes | 0.5% | 9.9% | 12.7% | | Provision for income taxes | 0.5% | 2.2% | 2.8% | | Net income | 0.0% | 7.7% | 9.9% | Adjusted EBITDA Reconciliation (in thousands) | Metric | FY2023 | FY2022 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Net Income | $233 | $21,100 | $(20,867) | -99% | | Share-based Compensation | $6,617 | $4,549 | $2,068 | 45% | | Income Taxes | $1,351 | $5,971 | $(4,620) | -77% | | Depreciation | $3,546 | $2,738 | $808 | 30% | | Interest Income | $(2,070) | $(335) | $(1,735) | 518% | | Acquisition/Partnership Transactions | $1,904 | — | $1,904 | n/m | | Employee Severance | $364 | — | $364 | n/m | | State Sales Tax Accrual | $7,825 | — | $7,825 | n/m | | **Adjusted EBITDA** | **$19,770** | **$34,023** | **$(14,253)** | **-42%** | - Sales decreased by **6.1%** to **$256.9 million** in FY2023 from **$273.4 million** in FY2022, driven by increased new customer acquisition costs and competitive pressures[173](index=173&type=chunk) - New customer acquisitions decreased from **325,000** in FY2022 to **274,000** in FY2023[174](index=174&type=chunk) - AutoShip program sales reached **44.4% of net sales** in Q4 FY2023, up from **30.9%** in Q4 FY2022, with a target of **50%** for FY2024[177](index=177&type=chunk) - Cost of sales decreased by **4.9%** to **$185.8 million** in FY2023, but increased as a percentage of sales to **72.4%** (from **71.4%**) due to higher per order freight expense[180](index=180&type=chunk) - Gross profit decreased by **9.0%** to **$71.0 million** in FY2023, with gross profit margin at **27.6%** (down from **28.6%**)[181](index=181&type=chunk) - General and administrative expenses increased by **60.5%** to **$49.5 million** in FY2023, primarily due to a **$5.8 million** increase in payroll (including stock compensation and severance), **$1.9 million** in professional fees, **$1.0 million** in software/systems, a **$7.8 million** sales tax accrual, and **$1.9 million** in acquisition-related expenses[182](index=182&type=chunk) - Advertising expenses increased by **$0.6 million** to **$19.4 million** in FY2023, with customer acquisition cost rising to **$71** (from **$58** in FY2022) due to higher advertising prices and less efficient marketing spend[183](index=183&type=chunk) - Depreciation expense increased to **$3.5 million** in FY2023 from **$2.7 million** in FY2022 due to new property and equipment additions[184](index=184&type=chunk) - Other income increased by **$1.7 million** to **$3.0 million** in FY2023, mainly from higher interest income due to increased interest rates[185](index=185&type=chunk) - Income tax provision decreased to **$1.4 million** in FY2023 from **$6.0 million** in FY2022, but the effective tax rate increased to **85.3%** (from **22.1%**) due to one-time non-deductible acquisition costs and restricted stock compensation[186](index=186&type=chunk) - Net income decreased by **98.9%** to **$0.2 million** in FY2023 from **$21.1 million** in FY2022[187](index=187&type=chunk) - Sales decreased by **11.6%** to **$273.4 million** in FY2022 from **$309.2 million** in FY2021, impacted by a more competitive environment, higher advertising costs, and increased veterinary visits post-pandemic[188](index=188&type=chunk) - New customer acquisitions decreased from **546,000** in FY2021 to **325,000** in FY2022[189](index=189&type=chunk) - Cost of sales increased as a percentage of sales to **71.4%** in FY2022 (from **70.9%**) due to manufacturers shifting rebate funding from product discounts to cooperative marketing[193](index=193&type=chunk) - Gross profit decreased by **13.2%** to **$78.1 million** in FY2022, with gross profit margin at **28.6%** (down from **29.1%**)[194](index=194&type=chunk) - General and administrative expenses increased by **9.0%** to **$30.8 million** in FY2022, mainly due to higher payroll (including stock compensation) and professional fees[195](index=195&type=chunk) - Advertising expenses decreased by **$2.8 million** to **$18.8 million** in FY2022 due to increased cooperative marketing funds, despite flat overall spending, with customer acquisition cost rising to **$58** (from **$40** in FY2021)[197](index=197&type=chunk) - Net income decreased by **31%** to **$21.1 million** in FY2022 from **$30.6 million** in FY2021[201](index=201&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$104.1 million** in cash, despite a **$22.8 million** decrease in working capital due to lower income and strategic investments Liquidity and Capital Resources (in thousands) | Metric | March 31, 2023 | March 31, 2022 | Change ($) | | :-------------------------------- | :------------- | :------------- | :--------- | | Working Capital | $95,000 | $117,800 | $(22,800) | | Cash and Cash Equivalents | $104,086 | $111,080 | $(6,994) | | Net Cash Provided by Operating Activities | $27,803 | $18,498 | $9,305 | | Net Cash Used in Investing Activities | $(10,260) | $(1,752) | $(8,508) | | Net Cash Used in Financing Activities | $(24,537) | $(24,384) | $(153) | - The **$22.8 million** decrease in working capital was primarily due to lower income from operations and cash used for the **$5 million** Vetster investment and **$5.3 million** in property and equipment additions[202](index=202&type=chunk) - Net cash provided by operating activities increased to **$27.8 million** in FY2023 from **$18.5 million** in FY2022, driven by increased accounts payable/accrued expenses and decreased inventory, partially offset by lower net income[203](index=203&type=chunk) - Net cash used in investing activities increased to **$10.3 million** in FY2023 from **$1.8 million** in FY2022, mainly due to the Vetster investment and higher property/equipment additions[203](index=203&type=chunk) - Net cash used in financing activities remained stable at approximately **$24.5 million** in both FY2023 and FY2022, primarily for dividend payments[203](index=203&type=chunk) - As of March 31, 2023, **$28.7 million** remained under the share repurchase program[204](index=204&type=chunk) - The acquisition of PetCareRx for approximately **$36.0 million** in cash closed on April 3, 2023[205](index=205&type=chunk) [Recent Accounting Pronouncements](index=38&type=section&id=Recent%20Accounting%20Pronouncements) No recently issued, but not yet effective, accounting standards are expected to have a material effect on the company's consolidated financial position, results of operations, or cash flows - No recently issued, but not yet effective, accounting standards are expected to have a material effect on the company's consolidated financial position, results of operations, or cash flows[207](index=207&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$104.1 million** cash and cash equivalents, with no exposure to derivatives or debt obligations - Primary market risk is interest rate risk, affecting returns on cash and cash equivalents[208](index=208&type=chunk) - As of March 31, 2023, the company had **$104.1 million** in cash and cash equivalents, managed within guidelines to limit market risk by holding federally-insured bank deposits and highly-liquid investments with maturities of three months or less[208](index=208&type=chunk)[209](index=209&type=chunk) - The company does not hold derivative financial instruments and had no debt obligations at March 31, 2023[209](index=209&type=chunk) [Financial Statements and Supplementary Data](index=40&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited consolidated financial statements for fiscal years 2021-2023, with an unqualified audit opinion on financials but a noted material weakness in internal control over financial reporting - The independent registered public accounting firm issued an unqualified opinion on the consolidated financial statements for the periods ended March 31, 2023, 2022, and 2021[213](index=213&type=chunk) - The auditor expressed an opinion that the company had not maintained effective internal control over financial reporting as of March 31, 2023, due to a material weakness related to inappropriate segregation of duties over manual journal entries[214](index=214&type=chunk) Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2023 | March 31, 2022 | | :---------------------------------------------------------------- | :------------- | :------------- | | Cash and cash equivalents | $104,086 | $111,080 | | Accounts receivable, net | $1,740 | $1,913 | | Inventories - finished goods | $19,023 | $32,455 | | Prepaid expenses and other current assets | $4,719 | $4,866 | | Prepaid income taxes | $1,883 | $681 | | **Total current assets** | **$131,451** | **$150,995** | | Property and equipment, net | $26,178 | $24,464 | | Intangible and other assets | $5,860 | $860 | | Deferred tax assets | $628 | — | | **Total noncurrent assets** | **$32,666** | **$25,324** | | **Total assets** | **$164,117** | **$176,319** | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $25,208 | $27,500 | | Accrued expenses and other current liabilities | $11,289 | $5,697 | | **Total current liabilities** | **$36,497** | **$33,197** | | Deferred tax liabilities | — | $936 | | Other long-term liabilities | $3,825 | — | | **Total liabilities** | **$40,322** | **$34,133** | | Total shareholders' equity | $123,795 | $142,186 | | **Total liabilities and shareholders' equity** | **$164,117** | **$176,319** | Consolidated Statements of Income (in thousands, except per share amounts) | Metric | FY2023 | FY2022 | FY2021 | | :----------------------------------- | :----- | :----- | :----- | | Sales | $256,858 | $273,417 | $309,215 | | Cost of sales | $185,844 | $195,341 | $219,267 | | Gross profit | $71,014 | $78,076 | $89,948 | | General and administrative expenses | $49,474 | $30,829 | $28,293 | | Advertising expenses | $19,424 | $18,799 | $21,641 | | Depreciation | $3,546 | $2,738 | $2,427 | | (Loss) income from operations | $(1,430) | $25,710 | $37,587 | | Total other income | $3,014 | $1,361 | $1,629 | | Income before provision for income taxes | $1,584 | $27,071 | $39,216 | | Provision for income taxes | $1,351 | $5,971 | $8,613 | | **Net income** | **$233** | **$21,100** | **$30,603** | | Basic Net income per common share | $0.01 | $1.05 | $1.53 | | Diluted Net income per common share | $0.01 | $1.04 | $1.52 | | Cash dividends declared per common share | $1.20 | $1.20 | $1.12 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY2023 | FY2022 | FY2021 | | :----------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $27,803 | $18,498 | $40,075 | | Net cash used in investing activities | $(10,260) | $(1,752) | $(2,432) | | Net cash used in financing activities | $(24,537) | $(24,384) | $(22,687) | | Net (decrease) increase in cash and cash equivalents | $(6,994) | $(7,638) | $14,956 | | Cash and cash equivalents, at end of year | $104,086 | $111,080 | $118,718 | - The company's allowance for doubtful accounts was **$35 thousand** at March 31, 2023, down from **$39 thousand** in 2022[236](index=236&type=chunk) - The inventory reserve for estimated obsolescence was **$48 thousand** at March 31, 2023, down from **$81 thousand** in 2022[240](index=240&type=chunk) - Deferred tax assets increased to **$3.155 million** in FY2023 from **$1.053 million** in FY2022, while deferred tax liabilities decreased to **$2.527 million** from **$1.989 million**[261](index=261&type=chunk) - The effective tax rate for FY2023 was **85.3%**, significantly higher than **22.1%** in FY2022, primarily due to non-deductible acquisition costs and restricted stock compensation, and a one-time true-up for new state filings[265](index=265&type=chunk) - Unrecognized compensation costs related to restricted stock were **$9.1 million** at March 31, 2023, expected to be recognized over a weighted average period of **1.6 years**[281](index=281&type=chunk) - The company recorded a **$7.8 million** increase for potential sales tax exposure in FY2023, with **$4.0 million** in current liabilities and **$3.8 million** in long-term liabilities[291](index=291&type=chunk) - The company made a **$5.0 million** minority interest investment in Vetster Inc. in April 2022 as part of a three-year partnership agreement[307](index=307&type=chunk) - The acquisition of PetCareRx, Inc. for approximately **$36.0 million** in cash closed on April 3, 2023, making it a wholly-owned subsidiary[308](index=308&type=chunk)[309](index=309&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=66&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) PetMed Express reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[332](index=332&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that internal controls were ineffective as of March 31, 2023, due to a material weakness in segregation of duties over manual journal entries, though no financial misstatement occurred - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023[333](index=333&type=chunk) - A material weakness was identified due to inadequate segregation of duties over the preparation, approval, and posting of manual journal entries[335](index=335&type=chunk) - Management believes the material weakness did not result in a misstatement of the financial statements[318](index=318&type=chunk)[335](index=335&type=chunk) - A remediation plan is being developed to increase resources and modify processes to address the segregation of duties issue[319](index=319&type=chunk)[336](index=336&type=chunk) - No other material changes in internal control over financial reporting occurred during the fourth quarter ended March 31, 2023[337](index=337&type=chunk) [Other Information](index=68&type=section&id=Item%209B.%20Other%20Information) This item is not applicable to PetMed Express, Inc - Not applicable[340](index=340&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=68&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) PetMed Express reported no disclosures regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[341](index=341&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=69&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement, and the company maintains a Code of Business Conduct and Ethics - Information is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Shareholders[344](index=344&type=chunk) - The company has a Corporate Code of Business Conduct and Ethics applicable to all officers, directors, and employees, available on its website[345](index=345&type=chunk) [Executive Compensation](index=69&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation for PetMed Express is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Shareholders[346](index=346&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=69&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related shareholder matters (excluding equity compensation plan details already in Item 5), is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Shareholders[347](index=347&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=69&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence for PetMed Express is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Shareholders[348](index=348&type=chunk) [Principal Accountant Fees and Services](index=69&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services for PetMed Express is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Shareholders[349](index=349&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section details all exhibits and financial statement schedules filed with the Form 10-K, including corporate documents, material contracts, and certifications - Includes consolidated financial statements, articles of incorporation, by-laws, and instruments defining security holders' rights[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk) - Lists material contracts, including various equity compensation plans (2015 Outside Director, 2016 Employee, 2022 Employee) and executive employment agreements (Mathew N. Hulett, Christine Chambers)[355](index=355&type=chunk)[356](index=356&type=chunk) - Also includes subsidiaries of the registrant, consents of experts, and certifications (CEO/CFO pursuant to Rule 13a-14(a)/15d-14(a) and Section 1350)[356](index=356&type=chunk) [Form 10–K Summary](index=72&type=section&id=Item%2016.%20Form%2010%E2%80%93K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[358](index=358&type=chunk) Signatures [Signatures](index=73&type=section&id=SIGNATURES) The report is duly signed by the principal executive and financial officers, along with the Board of Directors, as of May 23, 2023 - The report is signed by Mathew N. Hulett (CEO, President, Director) and Christine Chambers (CFO, Treasurer), along with the Chairman of the Board and other directors[362](index=362&type=chunk)[363](index=363&type=chunk) - The signing date for the report is May 23, 2023[362](index=362&type=chunk)

PetMeds 2.0 1) Adjusted EBITDA and adjusted EBITDA per share are non-GAAP financial measures. See "Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. 12 Investment Highlights Expert well-known online pet pharmacy with over 2 million unique customers Strong market demand for pet medication in pet category resilient to economic headwinds Broader strategic plan – expansion of new customers, more products, unique and ...

Washington D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the transition period from _____________ to _____________ Commission file number: 000-28827 ________________________ PETMED EXPRESS, INC. (Exact name of registrant as specified in its ...

FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION (Mark One) Washington D.C. 20549 For the transition period from _____________ to _____________ Commission file number: 000-28827 ________________________ PETMED EXPRESS, INC. (Exact name of registrant as specified in its charter) ________________________ (State or other jurisdiction of incorporation or organization) FLORIDA 65-0680967 (I.R.S. Employer Identification No.) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE A ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number: 000-28827 ______________________ PETMED EXPRESS, INC. (Exact name of registrant as specified in its chart ...

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-28827 PETMED EXPRESS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Exact name of registrant as specified in its charter) (State or other jurisdiction of (IRS Employ ...

Financial Data and Key Metrics Changes - Fourth quarter sales were USD66 million, a decrease of 7.9% compared to USD71.7 million for the same period last year [30] - Net income for the fourth quarter was USD6.1 million, or USD0.30 diluted per share, down from USD6.8 million, or USD0.34 diluted earnings per share, reflecting an 11% decrease [36] - Adjusted EBITDA for the fourth quarter was USD9.5 million, or USD0.47 on a diluted basis, down 8.4% from USD10.4 million, or USD0.52 on a diluted basis, for the same quarter last year [37][38] Business Line Data and Key Metrics Changes - The AutoShip & Save subscription program accounted for approximately 37% of revenue in March, a 41% increase from the previous quarter [9][32] - New order sales decreased by 35% to USD4.9 million for the quarter, compared to USD7.4 million for the same quarter last year [33] - Reorder sales decreased by 4.8% to USD61.1 million for the quarter, compared to USD64.2 million for the same quarter last year [34] Market Data and Key Metrics Changes - The U.S. pet market is over USD100 billion in annual sales and is expected to reach USD120 billion by 2024, with the addressable pet medication market at approximately USD10 billion [11] - The company operates in a growing market with favorable trends towards digital retail, as 7 out of 10 U.S. households own pets [14][15] Company Strategy and Development Direction - The company is transitioning from a leading pet medication retailer to a market leader in expert pet healthcare, focusing on nutrition, medications, wellness, and care [43] - A strategic partnership with Vetster was announced to enhance telemedicine capabilities, marking a significant step in the company's pet health expert strategy [10][48] Management's Comments on Operating Environment and Future Outlook - Management noted that revenue declines have begun to moderate, with expectations for sales in flea and tick categories to rebound as temperatures rise [6] - The company is committed to becoming a higher-growth entity while maintaining a strong balance sheet with no debt and approximately USD111 million in cash [25][38] Other Important Information - The Board of Directors declared a quarterly dividend of USD0.30 per share, payable on May 27, 2022 [39] - The company has a strong customer base with over 2 million pet parents having purchased from them in the last two years, and an NPS score over 80 [26] Q&A Session Summary Question: What are the demand trends for flea and tick season? - Management acknowledged a slow start to the flea and tick season due to colder weather in March, but expressed confidence in a rebound as temperatures rise [54][56] Question: How should advertising spend be framed for fiscal 2023? - Advertising spend was down about USD800,000 or 20% from the previous year, with expectations to maintain similar spending levels but with improved efficiency [60] Question: What are the financial contributions expected from the telemedicine partnership? - Management did not provide specific guidance on the financial impact of the telemedicine partnership but expressed excitement about the potential growth opportunities it presents [58][59] Question: Should future transactions be expected to be of similar size to Vetster? - Management indicated that they are open to various types of partnerships and investments, including M&A, as they seek to fill gaps in their service offerings [70][71]