PetMed Express, Inc. (NASDAQ:PETS), the leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies and vet services, has reported its fiscal fourth quarter and full-year 2024 financial results. The company's performance in the quarter and year reflected a continuation of the trends seen throughout much of fiscal 2024, with net sales up 6.6% year-over-year in the fourth quarter driven by the acquisition of PetCareRx.
PetMed Express has been making significant strides in consolidating its brands, enhancing the customer experience, and driving profitability. The company reported annual net income of -$7,464,000, annual revenue of $281,064,000, annual operating cash flow of $4,317,000, and annual free cash flow of -$194,000 for the fiscal year 2024.
Business Overview
PetMed Express, founded in 1996, is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies and vet services for dogs, cats, and horses. The company markets and sells directly to consumers through its websites, toll-free numbers, and mobile applications. PetMed Express offers consumers an attractive option for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service.
The company's product line includes approximately 15,000 of the most popular pet medications, health products, food and supplies, with 9,000 of these items added through the acquisition of PetCareRx in April 2023. PetMed Express markets its products through national advertising campaigns and social media, aiming to increase brand recognition, drive website traffic, acquire new customers, and maximize repeat purchases.
Consolidation of Brands
One of the key strategic initiatives for PetMed Express is the consolidation of its primary brands, PetMeds and PetCareRx, into a single united company. This move is driven by the company's commitment to streamline operations, lower the overall cost structure, and increase the value proposition by enhancing efficiencies and providing a more cohesive customer experience. By bringing together brands with the same mission and product assortment, PetMed Express can leverage its combined strength, reduce redundancies, and offer a unified stronger presence in the market.
Enhancing Customer Experience
PetMed Express is also focused on improving the customer experience through various initiatives. The company is advancing its customized technology that supports the AutoShip program, adding new features and facilitating a seamless shopping experience. This is a high priority as it drives higher customer lifetime value and repeat purchases.
The company has also made key additions to its leadership team, including a new Chief Marketing Officer, Chief Operating Officer, and Chief Digital and Technology Officer, to drive the company's marketing strategy, operational efficiency, and technology transformation. These new hires bring extensive experience in consumer behavior, integrated marketing solutions, creating meaningful loyalty programs, and driving successful technology implementations.
Driving Profitability
In addition to the consolidation of brands and enhancing the customer experience, PetMed Express is also focused on driving profitability through various initiatives. The company is deepening its relationships with key suppliers to optimize the supply chain and improve margins, managing future inventory through proper forecasting, reducing expenses to better align operating costs with sales, and focusing on operational efficiency and reducing order processing time.
The company is also leveraging data analytics to gain timely customer insights, accelerate responsiveness to customer demand, and create automation for improved daily workflows. Additionally, PetMed Express is innovating its product offerings, increasing high-margin private label assortments, and curating strategic partnerships to further promote health and wellness during all life stages for dogs, cats, and horses.
Financials
In the fourth quarter of fiscal 2024, PetMed Express reported net sales of $66.5 million, up 6.6% year-over-year, driven by the acquisition of PetCareRx. Consolidated reorder sales were $58.9 million, an increase of 4.6% compared to the same period last year. The company's recurring revenue, including AutoShip & Save sales and PetCareRx membership sales, increased to 54% of total sales in the fourth quarter, up from 44% in the same quarter last year.
Gross profit margin was 27.3% in the fourth quarter, compared to 27.9% in the same quarter last year, due to lower manufacturing rebates, higher promotional activity, and a lower prescription medication sales mix, partially offset by an increase in PetCareRx membership fees.
Adjusted EBITDA for the fourth quarter was $500,000, compared to $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.
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 in the same period last year. The change was primarily due to the increase in G&A and advertising expenses related to the PetCareRx acquisition, as well as an increase in depreciation and amortization, the tax provision, and a decrease in interest income.
For the full fiscal year 2024, PetMed Express reported annual net income of -$7,464,000, annual revenue of $281,064,000, annual operating cash flow of $4,317,000, and annual free cash flow of -$194,000.
Liquidity
As of March 31, 2024, PetMed Express had over $55 million in cash and equivalents and no debt. The company continues to look for ways to maximize cash through driving net working capital improvements, negotiating leases, and reviewing vendor agreements for efficiencies.
Outlook and Strategic Initiatives
PetMed Express is focused on several key strategic initiatives to drive growth and profitability. These include:
1. Delivering combined growth across all categories: The company is leveraging the expanded product offering from the PetCareRx acquisition to attract new customers and drive recurring revenue from existing customers.
2. Executing an enterprise-wide consolidation of businesses: PetMed Express is consolidating its PetMeds and PetCareRx brands to streamline operations, lower costs, and provide a more cohesive customer experience.
3. Executing digital transition initiatives: The company is investing in technology, AI, and automation across departments to modernize its tech stack, enhance operational efficiency, and improve the customer experience.
4. Operating with financial discipline: PetMed Express is focused on preserving liquidity, managing inventory, reducing expenses, and improving operational efficiency to drive profitability.
The company's newly formed Veterinary Advisory Board will also play a crucial role in advising the company on regulatory updates, product development, and the creation of customer-facing educational content.
Risks and Challenges
While PetMed Express is taking steps to drive growth and profitability, the company faces several risks and challenges, including:
- Increased competition in the pet medication and supplies market
- Potential changes in consumer behavior and spending patterns due to macroeconomic factors
- Regulatory changes in the pet medication industry
- Successful integration and optimization of the PetCareRx acquisition
- Ability to attract and retain key talent to execute on the company's strategic initiatives
Conclusion
PetMed Express is at a pivotal point in its history, as it works to consolidate its brands, enhance the customer experience, and drive profitability. The company's recent leadership additions, strategic initiatives, and focus on technology, automation, and operational efficiency position it well to capitalize on the growing pet medication and supplies market. However, the company must navigate various risks and challenges to achieve its long-term goals. Investors should closely monitor PetMed Express's progress in executing its strategic plan and delivering on its financial objectives.