PetMed Express, Inc. Q3 FY2025 earnings call

• Focused on strategic initiatives to reposition for long-term success, aiming for profitability through cost cutting and consolidation, achieving $2 million in adjusted EBITDA with $2.6 million reduction in G&A expenses.
• Enhanced digital shopping experience with website refresh, mobile app relaunch, Buy Now Pay Later option, and pethealthmd.com launch.
• Optimized SKUs, eliminating 4,000 underperforming SKUs, improving inventory turn to 1.5 from 0.9 last year, and reducing total inventory by 66% to $11.8 million.
• Integrated AI-driven workforce management tool in call centers, improving sales per agent and AOV for call center-driven orders.
• Adjusted marketing strategy due to competitive holiday environment, prioritizing margin protection, and refining marketing approach with new email system and long-term brand building efforts.
• Invested in technology to modernize tech stack, resolving OMS issues and replatforming autoship program.

Net sales for the third quarter were $53 million, down from $65.3 million in the same period last year. Gross profit was $14.9 million, representing 28.1% of sales, an 80 basis point improvement year-over-year. General and administrative expenses were $10.8 million, a 19.7% decrease from last year. Adjusted EBITDA was $2 million, up from $900,000 in the prior year period. The balance sheet was strong with $50 million of cash and cash equivalents and no debt.

• Have $50 million in cash and cash equivalents with no debt.
• Plan to continue investments in customer experience and marketing to drive sustainable, profitable growth, focusing on margin protection and strategic marketing resets for future expansion.

• Competitive market environment and promotional holiday pressures impacting sales and new customer acquisition.
• Customer spending pressures and reduced veterinarian visits affecting prescription volumes.
• Risks associated with forward-looking statements and potential differences between projected and actual results as outlined in SEC filings.

Q: On the new customer or customer count numbers, wanted to clarify growth rates and SKU count rationalization impact.

A: Sandra Campos stated 63,000 new customers with shipped orders this quarter. SKU rationalization had minimal impact on revenue as it involved underperforming and drop-shipped SKUs.

Q: About market trends, customer spending pressures, and marketing investment outlook.

A: Sandra Campos mentioned customers are pressured, with higher income households continuing to spend. Robyn D'Elia stated they are resetting marketing foundation, making foundational investments in customer experience, and plan to increase marketing spend as foundations are set, focusing on timely delivery and customer experience improvements.