PetMed Express Inc (PETS) Reports Growth Amidst Restatement of Financials

Net Sales Rise 11% YOY; Company to Correct Past Tax Accounting Errors

  • Net Sales: Increased to $65.3 million, up 11% from the previous year's quarter.
  • Gross Profit: Improved to $17.9 million with a gross margin of 27.4%, up from 25.9%.
  • Cash Position: Reported cash and equivalents of $49.4 million as of December 31, 2023.
  • Restatement Impact: Expected decrease in general and administrative expense for FY 2023, with a corresponding increase in net income.
  • Operational Highlights: Growth in recurring revenue with AutoShip & Save and PetPlus programs, representing 52.2% of revenue.
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On February 8, 2024, PetMed Express Inc (PETS, Financial) released its 8-K filing, announcing preliminary financial results for the third quarter ended December 31, 2023. The nationwide pet pharmacy, which markets prescription and non-prescription pet medications and supplies, reported an 11.0% year-over-year increase in net sales, which now stand at $65.3 million. This growth includes contributions from the recent acquisition of PetCareRx.

The company's gross profit for the quarter is expected to be $17.9 million, with an improved gross margin of 27.4%, up from 25.9% in the prior year. PetMed Express Inc (PETS, Financial) also reported a strong cash position with $49.4 million in cash and equivalents.

Financial Restatement and Impact

Despite the positive sales and profit performance, PetMed Express Inc (PETS, Financial) disclosed that it will restate certain previously issued financial statements due to errors in tax-related accounting entries. The restatement pertains to the incorrect application of GAAP in relation to sales tax liabilities and the improper valuation of a deferred tax asset and goodwill associated with the acquisition of PetCareRx. The restatement is expected to result in a decrease of general and administrative expenses for fiscal year 2023 by $6 million to $8 million and a corresponding increase in net income for the same period.

CEO Matt Hulett expressed disappointment over the need to restate financials but reassured that the restatement is strictly a tax accounting matter and will not impact the company's current cash balance. He highlighted the growth in recurring revenue streams, particularly the AutoShip & Save and PetPlus programs, which now account for over half of the company's revenue.

Having to restate previously issued financial statements is certainly disappointing, but the restatement is a matter of tax accounting and will have no impact on our current cash balance," said Matt Hulett, CEO and President.

Strategic Initiatives and Outlook

Despite the restatement, PetMed Express Inc (PETS, Financial) remains focused on its strategic initiatives, including the introduction of a premium food brand and enhancements to its AutoShip & Save program. These steps are part of the company's mission to deepen engagement with over two million pet parents by offering an expanded portfolio of products and services on a recurring basis.

Chief Financial Officer Christine Chambers stated that the restatement will not affect day-to-day business operations or strategic priorities and that the company is confident in its ability to drive long-term value.

The restatement, while unfortunate, is not expected to impact our day to day business operations or strategic priorities. As we look ahead, we remain confident in our strategy and ability to drive long-term value," said Christine Chambers, Chief Financial Officer of PetMeds.

The company will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, and expects to file a notification of late filing with the SEC. PetMed Express Inc (PETS, Financial) will host a conference call to review the selected preliminary third quarter financial results and discuss next steps.

For value investors and potential members, the financial resilience and growth of PetMed Express Inc (PETS, Financial) amidst the restatement process highlight the company's robust operational performance and its commitment to transparency and rectifying past accounting errors. The company's focus on expanding its recurring revenue base and strategic initiatives may offer long-term value, despite the short-term challenges presented by the restatement.

Explore the complete 8-K earnings release (here) from PetMed Express Inc for further details.