PetMeds® Announces Its Second Quarter Financial Results

DELRAY BEACH, Fla., Oct. 30, 2023 /PRNewswire/ -- PetMed Express, Inc. (NASDAQ: PETS)("PetMeds" or "Company"), Your Trusted Pet Health Expert™, today announced its financial results for its second quarter ended September 30, 2023. 

Quarterly Highlights

• Net sales for the quarter ended September 30, 2023, were $71.0 million, compared to $65.4 million for the second quarter in the prior year, an increase of 9% year over year. The current quarter includes the results from the recent acquisition of PCRx.
• PetMeds reported an increase in new customers of 25% year over year for the quarter ended September 30, 2023, representing the fourth consecutive quarter of new customer growth. This includes new customers from the PetCareRx acquisition.
• Net loss for the quarter ended September 30, 2023 was $70 thousand, or $(0.00) per diluted share. This compares to net income of $2.6 million, or $0.13 diluted earnings per share, for the prior year quarter ended September 30, 2022.
• Adjusted EBITDA¹ of $3.2 million for the current year quarter, compared to Adjusted EBITDA of $7.1 million, for the quarter ended September 30, 2022, a decrease of 55%. The decrease was due to incremental G&A in part due to the acquisition as well as strategic investments in PetMeds legacy third party expenses and net advertising expenses partially offset by increased gross profit and other income.

"We are excited to see the business continue to positively evolve into a recurring revenue business driven by our AutoShip & Save and PetPlus programs, which represented 51% of revenue during the quarter, up from 39% at the same time last year," said Matt Hulett, CEO and President. "PetMeds is focused on integrating and executing our newly acquired partnerships and assets to provide more value to our customers, which will also help strengthen our positioning in the pet health space, including our core PetMeds medication customer base." 

Capital Allocation
The Board of Directors and management have made a decision to suspend the quarterly dividend. This will allow the Company to invest directly in the business with a focus on organic and inorganic growth initiatives.The declaration and payment of future dividends, if any, is discretionary and will be subject to the determination by the Board of Directors.

Discussing the updated capital allocation strategy, Mr. Hulett stated, "Today's announced change in capital allocation follows a thorough and detailed analysis by our Board of Directors along with the management team. By suspending the quarterly dividend, we have the opportunity to invest the company's cash flow in projects and initiatives that we believe will yield higher returns. The pet care industry continues to grow and evolve and we believe we have opportunities to take advantage of that growth and drive higher returns to our shareholders."

This afternoon the Company will host a conference call to review the quarter's financial results. 

Time: 4:30 P.M. Eastern Time, October 30, 2023
Public call dial in (877) 407-0791 (toll free) or (201) 689-8563. 
Webcast stream link: https://investors.petmeds.com/overview/default.aspx for those who wish to stream the call via webcast.
Replay: Available until November 13, 2023, at 11:59 P.M Eastern Time.
To access the replay, call (844) 512-2921 (toll free) or (412) 317-6671 and enter passcode 13741999.

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Founded in 1996, PetMeds is Your Trusted Pet Health Expert™,  providing prescription and non-prescription medications, food, supplements, supplies and vet services for dogs, cats, and horses at competitive prices direct to the consumer through its 1-800-PetMeds toll free number and through its website at www.petmeds.com.

This press release may contain "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission, that involve a number of risks and uncertainties, including the Company's ability to meet the objectives included in its business plan.  Important factors that could cause results to differ materially from those indicated by such "forward-looking" statements are set forth in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section  in the Company's Annual Report on Form 10-K for the year ended March 31, 2023.  The Company's future results may also be impacted by other risk factors listed from time to time in its SEC filings, including, but not limited to, the Company's Form 10-Qs and its Annual Reports on Form 10-K. 

Non-GAAP Financial Measures

To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA, a non-GAAP financial measure that we calculate as net income excluding share-based compensation expense; depreciation and amortization; income tax provision; interest income (expense); and other non-operational expenses. We have provided reconciliations below of adjusted EBITDA to net income, the most directly comparable GAAP financial measures.

We have included adjusted EBITDA, herein, because it is a key measure used by our management and Board of Directors to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and other expenses. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.

We believe it is useful to exclude non-cash charges, such as share-based compensation expense, depreciation and amortization from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision and interest income (expense), as neither are components of our core business operations. We also believe that it is useful to exclude other expenses, including the investment banking fee related to the Vetster partnership, acquisition costs related to PetCareRx, employee severance and estimated state sales tax accrual as these items are not indicative of our ongoing operations. Adjusted EBITDA has limitations as a financial measure, and these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures;
• Adjusted EBITDA does not reflect share-based compensation. Share-based compensation has been, and will continue to be for the foreseeable future, a material recurring expense in our business and an important part of our compensation strategy;
• Adjusted EBITDA does not reflect interest income (expense), net; or changes in, or cash requirements for, our working capital;
• Adjusted EBITDA does not reflect transaction related costs and other items which are either not representative of our underlying operations or are incremental costs that result from an actual or planned transaction and include litigation matters, integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems;
• Adjusted EBITDA does not reflect certain non-operating expenses including the employee severance which reduces cash available to us;
• Adjusted EBITDA does not reflect certain expenses including the estimated state sales tax accrual which reduces cash available to us.
• Other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces the measures usefulness as comparative measures.

Because of these and other limitations, adjusted EBITDA should only be considered as supplemental to, and alongside with other GAAP based financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results.

The following table presents a reconciliation of net income, the most directly comparable GAAP measure to adjusted EBITDA for each of the periods indicated:

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SOURCE PetMed Express Inc