管理層發言
Greetings and welcome to PetMed Express Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. You may begin.
Thank you, operator, and I'd like to welcome everybody here today to the PetMed Express Fiscal Fourth Quarter 2024 Earnings Conference Call. Certain information that will be included during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. As amended that may involve a number of risks and uncertainties. These statements are based on our beliefs as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual results could differ materially from those projected. There can be no assurance that any forward-looking results will occur or be realized, and nothing contained in this presentation is or should be relied upon as a representation or warranty as to any future matters, including any matter in respect of the operations or business or financial condition of PetMed. PetMed undertakes no obligation to update publicly these forward-looking statements based on subsequent events, except as may be required by applicable law, regulation, or other competent legal authority. We've identified various risk factors associated with our operations in our most recent annual report and other filings with the Securities and Exchange Commission. Now let me turn the call over to our CEO and President, Sandra Campos. Sandra?
Thanks, John, and thank you to everyone for joining our conference call today. It is a true pleasure to speak with all of you for the first time, and let me just start by saying how incredibly honored I am to lead this company at such a pivotal point. PETS, which includes PetMeds and PetCareRx, is very much at the intersection of my personal and professional passion. That, along with the ability to transform a business within a growing sector, is what ultimately attracted me to join the Board as an independent director just over a year ago. I personally have eight rescue horses, two rescue dogs, and one very talkative senior cat. I intimately understand the profound bond that exists between pets and their families and the importance of working with trusted veterinarians who provide the valuable patient care as well as the loyalty one has for a reputable retail provider that takes care of all of your animals' needs in an efficient, timely, and professional manner. Throughout my retail and CPG career, I have consistently prioritized the needs of consumers and strive to establish disruptive, vibrant, and enduring brands that fulfill our promises of quality and value to their communities. I have led entrepreneurial enterprises, managed billion-dollar brand portfolios, and handled businesses that are global in scope, as well as having an extensive background in end-to-end supply chain. In this new role, I have the ability to bring my knowledge and experience to PETS as we refocus our teams on being a customer-centric, mission-based company whose primary goal is to empower pet families so that they can provide the best possible care for their dogs, cats, and horses and help them lead long and healthy lives. The market for pet medications, foods, and health products and services is continuing to grow, and servicing that market is what we've done really well since 1996. According to the American Pet Products Association, pet spending in the United States continues to increase, having risen by 7% to $147 billion in 2023. Veterinary care and prescription medications represented about 26% of the total spend, amounting to $38.3 billion. That leads us to pets where we have a remarkable opportunity ahead for growth in a sector that continues to expand. As an enterprise, we have some very positive key results. We filled almost 500,000 much-needed Rx prescriptions and Rx foods in the past 18 months. We continue to add new customers each year, 302,000 in fiscal 2024, and 274,000 new customers in fiscal 2023, which is a 10% year-over-year increase. Our average order value is healthy and has slightly increased year-over-year to $94 for fiscal 2024 from $93 for fiscal 2023. While I've only been at the helm of this company for four weeks, I would like to share my view on the future for PETS as well as some short-term tactical and strategic objectives for our business. First, consolidation of our brands. We believe that our primary brands, namely PetMeds and PetCareRx, are recognized as incredible experts among pet owners and are synonymous with pet health and well-being. The consolidation of our brands into a single united company is driven by our commitment to streamline operations, lower our overall cost structure, and increase the value proposition by enhancing efficiencies and providing a more cohesive customer experience. By bringing together brands that share the same mission and product assortment, we can leverage our combined strength, reduce redundancies, and offer a unified, stronger presence in the market. In the short term, our focus will be on improving fundamental processes, reducing operating expenses while enhancing some of our core offerings, such as our tiered membership model and our employer benefits partnerships. We characterize this as a work in progress as we continue to enhance the program with additional partnerships that help families provide preventive care during all life stages of their pets. Secondly, we will focus on cash flow generation while enhancing key partnerships. The company entered fiscal 2025 with a healthy liquidity position, and we will continue to monitor and manage cash flow through the consolidation of our two brands. Actions to preserve liquidity and maximize cash flows during fiscal 2025 will include, but are not limited to, the following: deepening our relationship with key suppliers to optimize our supply chain and improve margins, managing future inventory through adequately forecasting supply with expected demand to ensure that customers can find the products when they need them, and reducing expenses to better align operating costs with sales through the elimination of duplicative resources, including agency and vendor consolidation, and focusing on operational efficiency and reducing order processing time at our fulfillment centers, pharmacy, and call centers through tech enablement and automation. Third, we will focus on customer retention, loyalty, and frequency of visits. At the heart of our business are our loyal customers who rely on us for their dogs', cats', and horses' regular wellness needs. We have initiated the process of advancing our customized technology that supports our AutoShip program with new features for a seamless shopping experience; this is a high priority that drives higher customer lifetime value and repeat purchases. We have recently added a new Chief Digital and Technology Officer to lead these efforts, Umesh Sripad, who has a tremendous background in this field. Our marketing strategy is a commitment to reinvigorate our communications initiatives and deepen our engagement with consumers. We have just added a Chief Marketing Officer, Carla Dodds, who also brings extensive reach-out and e-commerce experience. We are personalizing the customer journey through advanced AI customer segmentation marketing solutions, bundling, and cross-selling opportunities across merchandising categories. Since Carla joined us just a couple of weeks ago, we are driving these initiatives today and going forward. Enriching our digital content library with the support of our Veterinary Advisory Board will be connected to our easy checkout across all customer touchpoints. Lastly, we have some new customer acquisition priorities, which will also be part of our fully integrated marketing strategy as we move forward. Number four, we will invest in technology, AI, and automation across departments. We have begun the work of integrating PetMeds and PCRx as one business unit across the organization. Each brand has had different systems, and we have already launched a single solution, best-in-class call center for our pet health specialists, implementing a phone system that goes live in August to facilitate seamless communication with our customers and our veterinary partners. We are also working on optimizing fulfillment operations across the two warehouse locations, alongside adding yet to be identified third-party logistics to reduce shipping costs and increase speed to customers' doorsteps. Additionally, we are enhancing our pharmacy software for increased digitization and greater team efficiency, revamping our business intelligence tools to enable faster decision-making across various operations driving growth and profitability, and implementing marketing technology AI tools for end-to-end efficiency and automation throughout the customer journey. We are well-positioned to thrive as the leader in this growing industry. For over two decades, we've served millions of customers who've entrusted us with the care of their beloved pets. Our competitive advantage is proven by our dedicated employees, consumers, veterinarians, and vendors' confidence that PetMeds and PetCareRx are synonymous with providing the best health care products for preventive care as well as for acute or chronic conditions for dogs, cats, and horses. We have invested heavily in our pharmacies at each location, and we have pharmacists with specialties in veterinary pharmacology and licenses in all 50 states. The pharmacies are accredited by the NABP and LegitScript and have excelled in all federal and state regulatory requirements, implementing a five-point rigorous verification process from the time we receive an order to when we ship it to the customer. By creating an ecosystem for holistic pet wellness with a laser focus on pet family needs, we believe we have the ability to expand our position as a trusted go-to leader. To best serve our customer needs, we have established strong vendor and strategic service partnerships with recognized brand names that consumers trust concerning any of their pet's health concerns. This includes our prescription and over-the-counter medication, supplements, supplies, food, both Rx and non-Rx, insurance, telehealth, employer benefits, our veterinary advisory board, our educational content, and private label products that provide alternatives at accessible price points for consumers. We are committed to connecting our customers through rich educational content with the support of our professional resources. We recently launched our Veterinary Advisory Board, referred to as the VAB, with the goal of ensuring our initiatives result in improved patient care. This esteemed board consists of five expert veterinarians across the country, each with decades of experience in private practice and academia, shaping the future of veterinary medicine. Dr. Lori Teller, DVM, DABVP for canine and feline, CVJ, and Clinical Professor in the Department of Small Animal Clinical Sciences at Texas A&M University School of Veterinary Medicine and Biomedical Sciences serves as a liaison between the company and our Veterinary Advisory Board. Dr. Teller and her four colleagues bring a wealth of knowledge and experience, which will be instrumental in achieving our fiscal year 2025 goals and beyond. The VAB's extensive expertise will be leveraged across the organization from product to marketing and will play a crucial role in advising the company on regulatory updates. Additionally, the VAB will support the development of customer-facing educational content about the vital role that veterinarians play in protecting family health. Most importantly, they will be instrumental in improving our veterinary-facing portal by reducing friction, applying historical data, and increasing usage to enhance the internal speed of transactions. Another key area of strength is our in-house customer support team, who are pet health specialists. As a premium service to our customers, our in-house pet specialists in the call center support more than 100,000 pet parent calls each month. Pet owners have the ability to contact our agents and pharmacists for assistance with their animal's well-being via telephone, chat, and email. We are in the process of consolidating our two teams and phone systems into one to ensure efficiency, consistency, scalability, and cost reduction. The quality of our senior management team has been a key focus for me over the past four weeks, and I am thrilled to welcome three exceptional leaders who will play pivotal roles in driving our company's future growth and success. Carla Dodds joined us on May 28th as our new Chief Marketing Officer. Carla is a dynamic and inspiring marketer who brings a wealth of experience in consumer behavior, integrated marketing solutions, creating meaningful loyalty and partnership programs, and increasing brand equity from enterprise companies such as Walmart, Mastercard, and Penske Media Corporation. Caroline Conegliano joined us on June 10th as Chief Operating Officer, a newly created position for PETS, underscoring the importance of having a singularly focused leader in this role. Her ability to seamlessly integrate analytical insights with creative solutions, along with her proven track record in scaling businesses, makes her an invaluable asset for our organization. Umesh Sripad, our new Chief Digital and Technology Officer, also joined the company on June 10th. Umesh's expertise in driving successful technology implementations and creating seamless customer experiences from companies like Ikea.com, Overstock.com, and Bed Bath & Beyond will significantly enhance our operational efficiency and effectiveness. Additionally, as a Board, we determined that we needed an independent director who could bring experience specific to technology, cybersecurity, and digital transformation. Therefore, we have added technology veteran Justin Mennen to the independent Board of Directors. Justin brings enterprise-level technology infrastructure, health care, and cybersecurity expertise that will be extremely valuable as we modernize and transition our tech stack. I have no doubt that these key additions will position us to effectively execute our strategy and accelerate the growth of PETS. Our ultimate goal is to position PETS as the go-to resource for pet health and wellness products, services, and experiences through our ecosystem. Ensuring sustained growth and a thriving customer community requires a broad roadmap and a disciplined execution. First, we are going to create personalized customer experiences across channels through modern technology that incorporates AI, automation, and product management that drives scale. Second, we will optimize our order processing and transportation management systems to deliver swiftly and efficiently from the time of order to the customer's doorstep. Third, we will develop mission-first, purposeful marketing campaigns that are authentic, improve customer engagement, and increase brand awareness across all touchpoints. Fourth, we will leverage data analytics to gain timely customer insights that will accelerate responsiveness to customer demand and create automation for improved daily workflows. Fifth, we will innovate product offerings, increasing high-margin private label assortments for greater accessibility. Finally, we will curate strategic partnerships to further promote health and wellness throughout all life stages for dogs, cats, and horses. Our company-owned and third-party operated management information system consists of a full range of retail, merchandising, human resource, and financial systems. These systems include applications related to digital operations, inventory management, supply chain, planning, sourcing, merchandising, payroll, scheduling, and financial reporting. We will prioritize these technology investments in order to upgrade our core systems and create efficiencies that support our digital operations, pharmacy operations, fulfillment center effectiveness, and customer relationship management tools along with our loyalty program. Through our planned integrated marketing campaigns and deepening our focus on customer segmentation, we believe we can acquire new customers in completely underpenetrated regions, including the Midwest, Northwest, and Southwest. More than 50% of our current revenues come from the Northeast and the West Coast states, as well as Southwestern Florida, where we will continue to focus our retention efforts. These initiatives are part of the strategy to achieve greater levels of success while creating significant value for both customers and shareholders. Christine will provide a detailed summary of our latest results, but in general, performance in the fourth quarter reflected a continuation of the trends we've seen throughout much of fiscal '24, as net sales grew by 6.6% on a year-over-year basis driven by the PetCareRx acquisition. We continue to make progress leveraging the combined pet business through our expanded product offering by focusing on attracting new customers and driving recurring revenue from existing customers. As a leader, I am unwaveringly committed to transparency, whether speaking to customers, vendors, employees, or shareholders. When I joined as CEO four weeks ago, I understood that our overall technology stack was going to be an area of focus and opportunity for near-term improvement. We are dedicating additional technology resources to modernize our tech stack, and as mentioned, we have added Umesh Sripad, our highly experienced new Chief Digital and Technology Officer to strengthen the leadership team. The PetCareRx business we acquired last year brings increased distribution capability, geographic diversity, technology enhancements, additional vendor relationships, and a long-tenured and experienced staff whose capabilities will only enhance and accelerate our efforts to improve productivity. A key to driving growth and profitability is the successful execution around these initiatives. Our future hinges on the commitment to innovation, delivering seamless experiences, and positively contributing to a brighter, healthier outlook for pets everywhere. At PETS, everything we do is rooted in consistently delivering high-quality, value-based products and services to millions of pets and their families while enhancing speed and efficiency. I am eager to build upon our foundation and to foster even more personalized and meaningful relationships at every touchpoint through advanced technology solutions, generative AI, and integrative marketing initiatives. Equally important, we are also committed to providing exceptional value across the pets through our loyalty programs and ongoing savings benefits that make high-quality products accessible to everyone. This will expand our existing loyalty program, including plans to add members to our National Employee Benefits Partnership, which is our PetPlus program. Our Veterinary Advisory Board will be instrumental in furthering our mission of enhancing our ecosystem of products and services. We currently offer free live chats with veterinary technicians and access to the VetLive on-demand veterinary telehealth service through our partner, Vetster, as well as valuable long-term savings through our pet insurance partnership with Pumpkin. We plan to utilize the exclusive veterinary community and approved credible publishers to create and maintain our educational platform for dog, cat, and horse owners. In summary, after my first four weeks in the role, I am even more convinced that our developing strategic business model will promote increased shareholder value. Our foundation has proven, and we have the liquidity, including a balance sheet with over $55 million in cash and no debt as of March 31st, 2024, that enables us to employ a thoughtful, balanced approach to capital allocation. As mentioned, our top priority will be consolidating the businesses, rightsizing our infrastructure, and investing in technology to drive sustainable growth and profitability. We are confident that our strategic initiatives will drive growth, improve profitability outcomes, and increase our key customer satisfaction metrics. I am grateful for a dedicated team of partners internally and externally, each of whom plays a crucial role in ensuring that PETS becomes the go-to resource for the health and wellness of dogs, cats, and horses. With that, let me hand the call to Christine to cover the fourth quarter results in more detail.
Thank you, Sandra. I will now provide an update on the fourth quarter fiscal year 2024 results for the quarter ending March 31st, 2024. Fourth quarter fiscal year 2024 sales were $66.5 million compared to sales of $62.4 million in the same period last year, representing growth of 6.6% year-over-year. The growth was due to incremental sales from the acquisition of PetCareRx, partially offset by a slowdown in call center response times stemming from the implementation of our new order management systems and AutoShip platforms during the fourth quarter. We welcomed approximately 73,000 new pet parents this quarter, a figure that remained relatively flat compared to the same period in the prior year. Consolidated reorder sales were $58.9 million for the quarter, an increase of 4.6% compared to reorder sales of $56.2 million in the same period last year. We continue to grow our recurring revenue, including AutoShip & Save sales and PetCareRx membership sales, which now represent 54% of total sales in the fourth quarter of fiscal year 2024, compared to 52% in the third quarter of fiscal 2024 and 44% in the same quarter last year. Increasing our recurring revenue remains a focus for us as it drives greater engagement and strengthens the predictability of our sales base. Prescriptions and premium food continue to be top categories for our customers, and we believe they present significant potential to help us increase order size, purchase frequency, and customer lifetime value, in addition to attracting new customers. Gross profit margin was 27.3% compared to 27.9% in the same quarter last year and 27.4% in the third quarter. The decrease year-over-year was attributed to lower manufacturing rebates, higher promotional activity, and a lower prescription medication sales mix, offset by an increase in PetCareRx membership fees. Adjusted EBITDA was $500,000 for the fourth quarter compared to an adjusted EBITDA of $3.6 million in the same period last year. The decrease was due to an increase in G&A and advertising expenses, partially offset by an increase in gross profit. The net loss for the fourth quarter was $5 million, or $0.25 per diluted share, compared to a net loss of $200,000, or $0.01 per diluted share for the same period last year. The year-over-year change was driven by an increase in G&A and advertising expenses of $3.5 million due to the PetCareRx acquisition, an increase in depreciation and amortization of $900,000, an increase in the tax provision of $870,000, and a decrease in interest income of $400,000, partially offset by an increase in gross profit related to the acquisition of $800,000. Turning to the balance sheet, as of March 31st, 2024, we had over $55 million in cash and equivalents and no debt. We continue to seek ways to maximize cash by improving net working capital, negotiating leases with our tenants, and reviewing vendor agreements for efficiencies. With that, I will now turn the call back to Sandra for concluding remarks.
Our strategic plan provides a robust foundation guiding our organization with a clear compass and ambitious key performance indicators. This plan is underpinned by these key pillars: First, delivering PETS' combined growth across all categories. Second, executing an enterprise-wide consolidation of businesses. Third, executing digital transition initiatives; and lastly, operating with financial discipline across every department and function. As we embark on a multiyear transformation for top-line growth across our distribution channels, we remain steadfast in our commitment to our core purpose. Our focus is on our pet families, ensuring they have access to the best products for preventive and acute care at all stages of their companion animal's lives. We celebrate veterinarians who provide exceptional care to their patients nationwide, and we welcome the support of our newly formed Veterinary Advisory Board as part of our fiscal year 2025 initiatives. Additionally, we value our strategic partners who help us create a comprehensive ecosystem supporting pets throughout their lives. We also prioritize our employees by investing in upskilling and providing ample career development opportunities. And with that, I am very thankful and honored once again to lead this organization during this pivotal time and look forward to further discussions. Thank you very much. We are now ready for the question-and-answer session.
分析師問答
Thank you. We will now begin the question-and-answer session. Our first question comes from Ryan Meyers with Lake Street Capital Markets. Please go ahead with your question.
Yes, thanks for taking my questions today. First one for me, given all the initiatives you guys just laid out, do you feel like you can generate top-line growth this year?
Hi, this is Sandra. And absolutely, our initiatives are focused on generating top-line growth. We have already started implementing some changes across not only our marketing initiatives but also our ongoing technology advancements. We know we have the opportunity to increase sales, not only with the addition of our AutoShip subscriptions for current and recurring customers but also in terms of new customers by creating these more seamless customer journeys and experiences so they can access the products they need at the right time. Additionally, as we look at our supply chain and distribution methods to get products closer to customers promptly and efficiently, we believe this will also promote top-line sales.
That's very helpful. And then next one for me, just switching over to the fundamentals of the business. Have you seen any further stabilization in the core business? Besides the consolidation you guys talked about, what else do you feel needs to be done here to drive growth in that business?
In the core fundamental business, we're really looking at our overall vendors, our top vendors, our top-performing SKUs with the help of our Veterinary Advisory Board. We're evaluating the most important medications in the Rx part of the business to ensure we have those products available from an inventory management perspective at all times. We are actually seeing an increase in returning customers and an improvement in conversion through our customer care and health specialists who are communicating with over 100,000 pet families each month via phone, chat, email, and online purchases. Every initiative contributes to propelling these efforts forward, and we expect growth in both top-line revenue and profitability. We are also optimizing our approaches to promotions, focusing on essential products that are core to the health and well-being of pets, which should enhance our margins without relying on value discounts.
Thank you. Our next question comes from Erin Wright with Morgan Stanley. Please proceed with your question.
Great. Thanks. So you gave a lot of great detail there on many of the changes you're making across the organization. In light of that, how should we think about the cost structure going forward as we move into next year? Also, how should we think about the investments you're making and the timing of that, especially considering how lumpy it can be quarter-to-quarter? Additionally, could you broadly share your philosophy on growth versus profitability regarding priorities?
Thank you for that question. We are absolutely focused on profitability. As it relates to the consolidation of these two businesses, we are creating synergies by reducing redundancies. We are assessing every line item that concerns vendors and agencies, which we operate through two separate systems that have duplicated costs. These immediate efficiencies will positively impact operating expenses. Our goal is to emphasize profitability through these reductions while achieving growth.
Okay. And then can you provide some metrics around the organic growth across the core business for the quarter, excluding PetCareRx or new customer growth metrics from an organic perspective?
Yes, thank you. Thanks, Erin, for the question. While we don’t break out metrics separately, we did report the new customer number for the quarter, which was relatively flat compared to last year on a consolidated basis. However, we are highly focused on the key metrics related to new customer acquisition, retention, and selling more to customers, as we emphasize the lifetime value of those customers and the repeatability of their purchases. Our new customer growth was flat for this quarter, and we do not split them out between the two businesses.
Okay. All right. Thank you.
Thank you. We have reached the end of our question-and-answer session. And with that, this will conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.