PetMed Express(US:PETS)2023-05-24 09:10Financial 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]