PetMed Express(PETS) - 2025 Q4 - Annual Report

PART I Business Overview PetMed Express is a leading direct-to-consumer pet health and wellness retailer, offering medications, food, and supplies, and expanding its omnichannel presence - PetMed Express, Inc. (PetMeds), established in 1996, is a pioneer and leading nationwide direct-to-consumer pet health and wellness retailer operating through its websites, customer contact center, and mobile applications[22] - In April 2023, PetMeds acquired PetCareRx, Inc., significantly expanding its product catalog to include a more extensive selection of premium food, supplements, treats, and other pet supplies[26] - The company's pharmacies are accredited by NABP.Com and LegitScript, employing licensed pharmacists and a 50-state licensed Pharmacist-in-Charge, ensuring regulatory compliance and operational excellence[27] - PetMeds is evolving from a digital-only model to an omnichannel business, expanding into multi-channels like Amazon, adding compound pharmacy partnerships, and introducing private label functional health products to enhance margins and brand loyalty[42] Pet Spending in the United States (2024) | Category | Amount (Billions USD) | Percentage of Total | | :------- | :-------------------- | :------------------ | | Total Pet Spending | $152 | 100% | | Veterinary Care & Prescription Medications | $39.8 | 26% | Customer Metrics (Fiscal Years 2024-2025) | Metric | Fiscal Year 2025 | Fiscal Year 2024 | | :----- | :--------------- | :--------------- | | New Customers Acquired | 351,000 | 457,000 | | Average Order Value | ~$97 | ~$94 | Risk Factors The Company faces significant risks including regulatory non-compliance, inventory management, cybersecurity threats, and internal control weaknesses - Failure to comply with state or federal regulations governing the pet health business, especially regarding prescription pet medications, could lead to reprimands, sanctions, fines, suspensions, or loss of pharmacy licenses, materially affecting operations[77][78] - The Company's financial condition and results of operations could be materially adversely affected by veterinarians resisting prescription authorizations or discouraging pet owners from purchasing from internet mail-order pharmacies[84][85] - Cybersecurity incidents, including breaches of security measures or those of third-party service providers, could damage the Company's reputation and brands, leading to significant legal and financial exposure, and adversely affecting business, financial condition, and results of operations[102][103][104] - The Company has identified material weaknesses in its internal controls over financial reporting for the periods ended March 31, 2024 and 2025, which could lead to inaccurate financial reporting, restatements, regulatory actions, and a decline in stock price[131][132][133] - The market for pet telemedicine is immature and uncertain; if it does not develop as expected or faces negative publicity, the growth and results of the Company's partnership with Vetster may be adversely affected, potentially leading to an impairment of its investment[124][126] Unresolved Staff Comments The Company has no unresolved staff comments from the SEC - There are no unresolved staff comments[152] Cybersecurity PetMed Express maintains an enterprise-wide cybersecurity program guided by the NIST CSF, covering governance, policy, prevention, detection, incident response, and recovery - PetMed Express maintains an enterprise-wide cybersecurity program designed to identify, assess, manage, and mitigate information security risks, aligning with NIST CSF (Cyber Security Framework) functions: identify, protect, detect, respond, and recover[153][154][155] - Oversight of cybersecurity risk is formally managed by the Audit Committee of the Board of Directors, which receives regular briefings on strategy, threats, incident trends, and remediation activities[156] - The company deploys a layered defense model, including regular system scans, vulnerability assessments, penetration testing, PCI DSS compliance, endpoint detection and response (EDR) tools, and secure development practices[158][162] - To date, the Company has not identified any cybersecurity incidents that have materially impacted its business, operations, or financial results, despite experiencing routine threats and minor incidents[161] Properties PetMed Express owns its principal executive offices and main distribution center in Delray Beach, Florida, and leases two facilities in Lynbrook, New York - The Company owns its principal executive offices and distribution center in Delray Beach, Florida, consisting of approximately 634,000 square feet of land (14.6 acres) and two building complexes totaling about 185,000 square feet[164] - Approximately 48% of the Delray Beach Property was leased to two tenants as of March 31, 2025, with a remaining weighted average lease term of 5.2 years[164] - In April 2023, the Company assumed leases for two PetCareRx facilities in Lynbrook, New York, totaling approximately 32,000 square feet, used for shipping, fulfillment, and executive offices, with leases expiring in April 2027[165] Legal Proceedings PetMed Express is routinely involved in various claims and lawsuits, including two class-action lawsuits alleging misrepresentation of product prices - The Company is involved in routine litigation and administrative complaints, including those related to products, contracts, employment, intellectual property, and consumer protection, which management believes are not likely to have a material adverse effect on financial condition or results of operations[166] - On April 18, 2024, a class-action lawsuit was filed in Pennsylvania alleging the Company violated consumer protection law by misrepresenting 'reg.' prices for products it never charged, seeking damages or refunds[167] - On February 14, 2025, another class-action lawsuit was filed in New York, alleging the Company used 'false reference prices' or 'false discounts' to artificially inflate prices, violating New York and California consumer protection laws[168] - The Company denies liability in both class-action lawsuits and intends to defend the actions, but cannot determine materiality or estimate a range of potential liability at this time[167][168] Mine Safety Disclosures This item is not applicable to PetMed Express, Inc - Mine Safety Disclosures are not applicable to the Company[169] PART II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities PetMed Express's common stock trades on the NASDAQ Global Select Market, with dividends suspended to reallocate cash towards growth initiatives - The Company's common stock is traded on the NASDAQ Global Select Market under the symbol 'PETS'[171] - As of September 30, 2025, there were 75 active holders of record of the Company's common stock[171] - The Board of Directors suspended the quarterly dividend indefinitely on February 1, 2024, to focus cash flow on growth and other higher return initiatives[173][240] Common Stock Performance (March 31, 2020 - March 31, 2025) | Index | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | :------------------- | :----- | :----- | :----- | :----- | :----- | :----- | | PetMed Express, Inc. | 100.00 | 126.49 | 96.87 | 64.66 | 19.92 | 17.42 | | NASDAQ Composite | 100.00 | 172.04 | 184.68 | 158.72 | 212.72 | 224.97 | | S&P 500 | 100.00 | 153.71 | 175.29 | 158.99 | 203.30 | 215.93 | | Russell 2000 | 100.00 | 192.57 | 179.53 | 156.32 | 184.25 | 175.46 | Securities Authorized for Issuance under Equity Compensation Plans (March 31, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Number of securities remaining available for further issuance under equity compensation plans | | :------------------------------------ | :------------------------------------------------------------------------