PetMed Express, Inc. Q1 FY2025 earnings call

• Added highly experienced executives in May and June, including new CMO, COO, and CDTO. Doug Krulik joined as Chief Accounting Officer in August. New independent directors added.
• Q1 results were a transition quarter; new team is focusing on enhancing operational performance, optimizing cost structure, and customer growth.
• Made progress on cost reduction initiatives like consolidating operations between PetMed and PetCareRx.
• Advanced customer growth strategies with site evolution, enhanced messaging, and targeted media spend.
• Technology improvements driving seamless customer journey and order speed. Early indicators showing improvement in order values, margins, etc.
• Q1 results affected by macroeconomic factors, higher consumer promotions, and tech challenges, but operational efficiency improved.
• Starting Q2, will update new customer metric to retail industry standards.
• Positive indicators since July: web visits up 4%, conversion rate uplift 12%, media spend reduced 20% vs last year.
• Prioritizing strategic initiatives to reposition for long-term success, including launching 350 SKUs of Hill's and Royal Canin Rx Food, partnering with well-groomed, and modernizing call center system.

In the first quarter of fiscal year 2025, sales were $68 million, a 13% decline from the prior year. Gross profit margin was 26.4% compared to 28.8% in the same quarter last year. Inventory turns improved by 20% and ending inventory was down 11% year-over-year. The company reported 75,000 new customers in the first quarter, achieved despite a 20% strategic reduction in media spend, resulting in an 8% improvement in customer acquisition costs.

• Saw stabilization in revenues, conversion rates, and margins with week-over-week sales improvement.
• Unique customers and transactions increased over the past two months compared to last year.
• Believes strategic actions like new acquisition campaigns will accelerate sales growth and enhance profitability.

• Macro pressures such as fewer veterinary clinic visits leading to fewer prescriptions.
• Higher consumer promotional usage impacting margins.
• Technology disruptions causing less positive customer experiences like order tracking issues, delivery delays, and self-service challenges.

Q: Can you provide more detail on macro pressures that drove the 13% revenue decline and confidence in driving growth despite macro pressures?

A: Macro pressures include fewer veterinary clinic visits reducing prescriptions and consumers seeking more promotions. Confident in capturing more customers through technology, marketing strategies, and improved customer service to create a seamless experience in the large pet care market.

Q: How should we think about revenue stabilization into Q2 given recent stabilization?

A: Seeing stabilization in revenues, conversion rates, and margins. Margins improving month-over-month. Sales week-over-week continuing to improve, conversion rate stabilizing, and unique customers/transactions increasing vs last year.

Q: Can you provide more detail on technology issues during the quarter?

A: Implemented a new order management system earlier in the year causing disruptions with long hold and wait times in call center and pharmacy. These issues have been addressed, with call times and handle times back to normal, and improvements made for veterinary clinic prescription approvals.