Release Date: June 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PetMed Express Inc (PETS, Financial) reported a 6.6% year-over-year increase in net sales for the fourth quarter, driven by the acquisition of PetCareRx.
- The company filled almost 500,000 prescriptions and Rx foods in the past 18 months, indicating strong operational performance.
- PetMed Express Inc (PETS) added 302,000 new customers in fiscal 2024, a 10% increase from the previous year.
- The average order value increased slightly to $94 in fiscal 2024 from $93 in fiscal 2023, showing stable customer spending.
- The company has a strong liquidity position with over $55 million in cash and no debt as of March 31, 2024.
Negative Points
- Gross profit margin decreased to 27.3% from 27.9% in the same quarter last year, due to lower manufacturing rebates and higher promotional activity.
- Adjusted EBITDA dropped significantly to $500,000 from $3.6 million in the same period last year, indicating increased operational costs.
- Net loss for the fourth quarter was $5 million, compared to a net loss of $200,000 in the same period last year.
- The implementation of new order management systems and AutoShip platforms caused a slowdown in call center response times.
- The company faces challenges in consolidating its brands and reducing operating expenses, which are still characterized as a work in progress.
Q & A Highlights
Q: Given all the initiatives you guys just laid out, do you feel like you can generate top line growth this year?
A: (Sandra Campos, President & CEO) Absolutely, our initiatives are focused on generating top line growth. We have started to implement changes across our marketing initiatives and technology advancements. We believe that increasing sales through AutoShip subscriptions and creating seamless customer experiences will help in achieving top line growth. Additionally, optimizing our supply chain and distribution will contribute to this goal.
Q: Have you seen any further stabilization in the core business? Besides the consolidation you guys talked about, what else do you feel like needs to be done here to drive growth in that business?
A: (Sandra Campos, President & CEO) We are focusing on our top vendors and SKUs, ensuring we have the necessary inventory. We are seeing an increase in returning customers and improvements in conversion rates through our customer care and online channels. Additionally, we are making changes to promotions to focus on core products, which will improve margins and drive growth.
Q: How should we think about the cost structure going forward and going into next year? And how should we think about investments that you're making and the timing of that?
A: (Sandra Campos, President & CEO) We are focused on profitability and reducing redundancies through the consolidation of our businesses. This includes finding efficiencies and reducing duplications in vendors and agencies. These actions will have an immediate impact on reducing operating expenses and improving profitability.
Q: Can you give us some metrics around what the organic growth across the base business actually was in the quarter excluding the PetCareRx or new customer growth across the base business?
A: (Christine Chambers, CFO) We don't break the metrics out separately, but we did report that new customer numbers were relatively flat compared to last year on a consolidated basis. We are focused on new customer acquisition, retention, and increasing the lifetime value of our customers.
Q: What are the key areas of focus for improving customer retention and loyalty?
A: (Sandra Campos, President & CEO) We are advancing our technology to support our AutoShip program and enhancing our marketing strategy to deepen engagement with consumers. We have added a new Chief Digital and Technology Officer and a Chief Marketing Officer to lead these efforts. Personalizing the customer journey and improving our digital content library are high priorities.
Q: How are you leveraging technology and AI to improve operations?
A: (Sandra Campos, President & CEO) We are integrating PetMeds and PetCareRx into one business unit and launching a best-in-class call center system. We are also optimizing operations across our warehouse locations, enhancing pharmacy software, and implementing business intelligence tools for faster decision-making. AI tools will be used for end-to-end efficiency and automation throughout the customer journey.
Q: What are your plans for expanding your market presence?
A: (Sandra Campos, President & CEO) We plan to create personalized customer experiences through modern technology and optimize our order processing and transportation management systems. We will also develop marketing campaigns to improve customer engagement and leverage data analytics for timely customer insights. Additionally, we aim to innovate product offerings and curate strategic partnerships to promote health and wellness for pets.
Q: How are you addressing the challenges in the supply chain and inventory management?
A: (Sandra Campos, President & CEO) We are deepening our relationships with key suppliers to optimize our supply chain and improve margins. We are also managing future inventory through proper forecasting and ensuring that customers can find the products they need when they need them. Reducing expenses and improving operational efficiency are also key focus areas.
Q: What is the role of the Veterinary Advisory Board in your strategic initiatives?
A: (Sandra Campos, President & CEO) The Veterinary Advisory Board (VAB) consists of expert veterinarians who will advise on regulatory updates, support the development of customer-facing educational content, and improve our veterinary-facing portal. The VAB will play a crucial role in ensuring that our initiatives result in improved patient care and support our fiscal year 2025 goals and beyond.
Q: How are you planning to enhance customer support and engagement?
A: (Sandra Campos, President & CEO) We are consolidating our customer support teams and phone systems to ensure efficiency and consistency. Our in-house customer support team, consisting of pet health specialists, handles over 100,000 pet parent calls each month. We are also enhancing our digital content library and personalizing the customer journey through advanced AI customer segmentation marketing solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
