PetMed Express(US:PETS)2023-05-24 09:16Financial Data and Key Metrics Changes - Second quarter sales were $65.4 million, a decrease of 3% compared to $67.4 million in the same period last year [35] - Adjusted EBITDA was $7.1 million, down from $9.8 million year-over-year [38] - Net income was $2.6 million or $0.13 per diluted share, compared to $6.3 million or $0.31 per diluted share for the same quarter last year [37] - Gross profit as a percentage of sales was 28.2%, a decline of 20 basis points year-over-year [37] - Cash and cash equivalents were approximately $96.5 million, with no debt as of September 30, 2022 [41] Business Line Data and Key Metrics Changes - Repeat sales for the quarter were $59.7 million, a decrease of 1.5% compared to $60.6 million in the same period last year [36] - AutoShip & Save sales as a percentage of total sales increased to 39%, a 15% sequential increase from the previous quarter [36][21] - New customer count for the quarter was approximately 61,000, down from 69,000 in the prior quarter [36] Market Data and Key Metrics Changes - The U.S. pet market is over $120 billion in sales, with the addressable pet medication market exceeding $10 billion [23] - The pet healthcare industry is experiencing a shift towards digital services, with increasing demand for online purchasing [26][27] Company Strategy and Development Direction - The company is transitioning from a leading pet medication retailer to a pet health expert, focusing on digital transformation and expanding its service offerings [5][12] - The strategy includes enhancing the product catalog, particularly in nutrition and consumables, to increase customer lifetime value (LTV) [21][30] - The company aims to leverage its strong brand and market position to capture a larger share of the growing pet healthcare market [14][25] Management's Comments on Operating Environment and Future Outlook - Management noted a solid rebound in business during the second fiscal quarter due to warmer temperatures, which stimulated demand for flea and tick and heartworm medications [7] - The company is optimistic about the future, emphasizing the importance of digital transformation in pet healthcare [12][27] - Management highlighted the resilience of the pet care market, even during recessionary times, as pet parents prioritize spending on their pets [25] Other Important Information - The company has approximately $34 million in inventory, with higher levels attributed to the timing of inventory purchases [41] - A quarterly dividend of $0.30 per share was approved, to be paid on November 30, 2022 [41] Q&A Session Summary Question: Expansion of customer LTV initiatives - Management discussed the importance of expanding the product assortment and increasing LTV to CAC ratio, with a focus on growing the AutoShip program and adding more consumables [45][46] Question: Advertising spend and efficiency - Management indicated that advertising spend was flat year-over-year, with a focus on balancing awareness and performance marketing to improve efficiency [48] Question: Expanded product selection and SKU goals - Management stated there is no specific SKU goal but emphasized the importance of adding premium brands and improving sales capabilities outside of medications [52][53] Question: Impact of political ad campaigning on advertising efficiency - Management noted no significant impact from political ad campaigning on their advertising efficiency, although the current quarter is typically slower due to seasonality [55] Question: G&A expenses growth rate - Management explained that G&A expenses have increased due to strategic investments in people and technology, with expectations for continued investment to support growth [57][58]