PetMed Express(PETS) - 2026 Q3 - Quarterly Report

Financial Performance - For the three months ended December 31, 2025, the gross profit margin decreased to 23.3% from 31.0% in the same period of 2024, while the cost of sales increased to 71.5% from 69.0%[121] - The net loss for the three months ended December 31, 2025, was 25.9%, compared to a net loss of 1.5% for the same period in 2024[121] - Total operating expenses increased to 49.0% of sales for the three months ended December 31, 2025, compared to 32.0% for the same period in 2024[121] - Net sales decreased by approximately $11.3 million, or 21.7%, to approximately $40.7 million for the quarter ended December 31, 2025, compared to approximately $52.0 million for the same quarter in 2024[130] - Adjusted EBITDA for the quarter ended December 31, 2025 was $(7,557) thousand, a decrease of $(9,559) thousand or (477)% compared to $2,002 thousand for the same quarter in 2024[127] - Gross profit decreased by approximately $6.7 million, or 41.4%, to approximately $9.5 million for the quarter ended December 31, 2025, from approximately $16.1 million for the same quarter in 2024[140] - Sales decreased by approximately $40.0 million, or 22.7%, to approximately $136.2 million for the nine months ended December 31, 2025, compared to approximately $176.2 million for the same period in 2024[130] Customer Metrics - The company acquired approximately 59,000 new customers for the quarter ended December 31, 2025, compared to approximately 63,000 new customers for the same quarter in 2024[134] - Recurring net sales, including AutoShip & Save subscriptions, accounted for 61.5% of total gross sales for the quarter ended December 31, 2025, up from 56.2% for the same period last year[136] Expenses and Costs - General and administrative expenses increased by approximately $1.4 million, or 13.1%, to approximately $12.2 million for the quarter ended December 31, 2025, from approximately $10.8 million for the same quarter in 2024[141] - Advertising expenses increased by approximately $1.1 million, or 26.7%, to approximately $5.3 million for the quarter ended December 31, 2025, compared to approximately $4.2 million for the same quarter in 2024[145] - The advertising cost of acquiring a new customer was $90 for the quarter ended December 31, 2025, compared to $66 for the same quarter in 2024, indicating a significant increase in customer acquisition costs[146] - Depreciation and amortization expense rose to $2.4 million for the quarter ended December 31, 2025, up from $1.6 million for the same quarter in 2024[147] Impairment and Financial Health - The Company reported an impairment charge of $26.7 million for goodwill during the three months ended June 30, 2025, which represented the entirety of the goodwill balance previously recorded[116] - The Company identified potential impairment triggering events due to a downward revision in revenue forecasts and a decrease in market capitalization[115] - Working capital decreased to $6.3 million as of December 31, 2025, from $16.1 million as of March 31, 2025, primarily due to a $30.4 million decrease in current assets[151] - Net cash used in operating activities was $23.7 million for the nine months ended December 31, 2025, compared to $2.3 million for the same period in 2024, indicating a substantial increase in cash outflow[152] - As of December 31, 2025, the company had $26.9 million in cash and cash equivalents, with no debt obligations[155] Taxation - The income tax provision for the quarter ended December 31, 2025, was approximately $11 thousand, compared to approximately $0.5 million for the same quarter in 2024, reflecting a significant decrease[149] - The effective tax rate for the quarter ended December 31, 2025, was approximately (0.1)%, compared to approximately (192.1)% for the same quarter in 2024, highlighting a significant change in tax circumstances[149] Market Conditions - Macroeconomic factors such as inflation and rising interest rates are expected to impact revenue growth rates for the remainder of fiscal 2026[120] - Future sales may be adversely affected due to increased competition and changing consumer behavior, making predictions challenging[137] Product Offering - The Company has approximately 7,200 products in its line, including medications and health products for pets[109] - The Company markets its products through national advertising campaigns aimed at increasing brand recognition and customer acquisition[110] Dividend Policy - The Board of Directors elected to suspend the quarterly dividend indefinitely to focus on growth initiatives and higher return opportunities[153]