PetMed Express, Inc. (NASDAQ: PETS), Your Trusted Pet Health
Expert™, today announced its financial results for its third
quarter ended December 31, 2022.
Quarterly Highlights
- Net sales for the quarter ended
December 31, 2022, were $58.9 million, compared to $60.7
million for third quarter in the prior year, a decrease of
3.0%.
- PetMeds® reports new customers increased 9% year over year for
the quarter ended December 31, 2022 representing the first
customer increase in 2 ½ years.
- Net loss for the quarter ended
December 31, 2022 was $19.0 thousand, or $(0.0) diluted
earnings per share or $0.02 per diluted share excluding the effects
of certain acquisition related costs not indicative of our ongoing
operations. This compares to net income of $4.3 million, or $0.21
diluted earnings per share, for the prior year quarter ended
December 31, 2021.
- Adjusted EBITDA1 was $2.7 million,
for the current year quarter, compared to Adjusted EBITDA of $7.6
million, for the quarter ended December 31, 2021, a decrease
of 64%.
“We’re pleased to see the first year over year
increase in customers for PetMeds in the last 10 quarters. Revenue
was down year over year 3.0%, but stable sequentially despite the
prior quarter benefiting from an elongated flea and tick season,"
said Matt Hulett, CEO and President.
Mr. Hulett continued, “We believe that we are
making progress towards being a leader in total pet health
expertise. We are confident that our investments in the core
PetMeds business, our unique on-demand digital veterinarian and pet
telemedicine service and our recently announced acquisition of
PetCareRx, will position PetMeds for future long-term growth.”
The Board of Directors declared a quarterly
dividend of $0.30 per share on the Company’s common stock. The
dividend will be payable on February 27, 2023, to shareholders
of record at the close of business on February 20, 2023. The
declaration and payment of future dividends is discretionary and
will be subject to the determination by the Board of Directors.
Based on a sales tax assessment received and
accrued in the second quarter fiscal year 2023, the Company
initiated a process to evaluate the potential for further sales tax
contingencies, We expect to complete the evaluation in the quarter
ending March 31, 2023, the results of which could have a
material effect on the results of operations.
This afternoon the Company will host a
conference call to review the quarter’s financial
results.
Time: 4:30 P.M. Eastern Time,
February 6, 2023Public call dial in (877)
407-0789 (toll free) or (201) 689-8562. Webcast
stream link:
https://www.1800petmeds.com/investor.html for those who wish
to stream the call via webcast. Replay:
Available until February 20, 2023, at 11:59 P.M Eastern Time. To
access the replay, call (844) 512-2921 (toll free) or (412)
317-6671 and enter passcode 13735907.
Founded in 1996, PetMeds is Your Trusted Pet
Health Expert™, delivering prescription and non-prescription pet
medications and other health products for dogs, cats, and horses at
competitive prices direct to the consumer through its 1-800-PetMeds
toll free number and through its website
at www.petmeds.com.
This press release may contain “forward-looking”
statements, as defined in the Private Securities Litigation Reform
Act of 1995 or by the Securities and Exchange Commission, that
involve a number of risks and uncertainties, including the
Company’s ability to meet the objectives included in its business
plan. Important factors that could cause results to differ
materially from those indicated by such “forward-looking”
statements are set forth in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the PetMed Express
Annual Report on Form 10-K for the year ended March 31,
2022. The Company’s future results may also be impacted by
other risk factors listed from time to time in its SEC filings,
including, but not limited to, the Company's Form 10-Q and its
Annual Report on Form 10-K.
PETMEDS INVESTOR RELATIONS
CONTACTBrian M. Prenoveau, CFAMZ
Group561-489-5315investor@petmeds.com
PETMEDS MEDIA CONTACTMary Eva
TredwayButin PRmaryeva@butinpr.com
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except for per share
data)
|
December 31,2022 |
|
March 31,2022 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
102,428 |
|
$ |
111,080 |
Accounts receivable, less allowance for doubtful accounts of $40
and $39, respectively |
|
1,944 |
|
|
1,913 |
Inventories - finished goods |
|
22,402 |
|
|
32,455 |
Prepaid expenses and other current assets |
|
5,637 |
|
|
4,866 |
Prepaid income taxes |
|
1,608 |
|
|
681 |
Total current assets |
|
134,019 |
|
|
150,995 |
|
|
|
|
Noncurrent assets: |
|
|
|
Property and equipment, net |
|
25,242 |
|
|
24,464 |
Intangible and other assets |
|
5,860 |
|
|
860 |
Total noncurrent assets |
|
31,102 |
|
|
25,324 |
|
|
|
|
Total assets |
$ |
165,121 |
|
$ |
176,319 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
24,317 |
|
$ |
27,500 |
Accrued expenses and other current liabilities |
|
6,754 |
|
|
5,697 |
Total current liabilities |
|
31,071 |
|
|
33,197 |
|
|
|
|
Deferred tax liabilities |
|
465 |
|
|
936 |
|
|
|
|
Total liabilities |
|
31,536 |
|
|
34,133 |
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock, $.001 par value, 5,000 shares authorized; 3
convertible shares issued and outstanding with a liquidation
preference of $4 per share |
|
9 |
|
|
9 |
Common stock, $.001 par value, 40,000 shares authorized; 21,077 and
20,979 shares issued and outstanding, respectively |
|
21 |
|
|
21 |
Additional paid-in capital |
|
16,647 |
|
|
11,660 |
Retained earnings |
|
116,908 |
|
|
130,496 |
|
|
|
|
Total shareholders' equity |
|
133,585 |
|
|
142,186 |
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
165,121 |
|
$ |
176,319 |
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(In thousands, except for per share amounts)
(Unaudited)
|
Three Months EndedDecember
31, |
|
Nine Months EndedDecember
31, |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Sales |
$ |
58,870 |
|
|
$ |
60,717 |
|
$ |
194,451 |
|
$ |
207,415 |
Cost of sales |
|
43,632 |
|
|
|
42,992 |
|
|
140,819 |
|
|
148,736 |
|
|
|
|
|
|
|
|
Gross profit |
|
15,238 |
|
|
|
17,725 |
|
|
53,632 |
|
|
58,679 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
General and administrative |
|
10,425 |
|
|
|
7,541 |
|
|
30,529 |
|
|
22,540 |
Advertising |
|
4,641 |
|
|
|
4,327 |
|
|
14,869 |
|
|
15,435 |
Depreciation |
|
941 |
|
|
|
710 |
|
|
2,552 |
|
|
2,051 |
Total operating expenses |
|
16,007 |
|
|
|
12,578 |
|
|
47,950 |
|
|
40,026 |
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
(769 |
) |
|
|
5,147 |
|
|
5,682 |
|
|
18,653 |
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
Interest income, net |
|
708 |
|
|
|
84 |
|
|
1,213 |
|
|
243 |
Other, net |
|
259 |
|
|
|
287 |
|
|
718 |
|
|
741 |
Total other income |
|
967 |
|
|
|
371 |
|
|
1,931 |
|
|
984 |
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
198 |
|
|
|
5,518 |
|
|
7,613 |
|
|
19,637 |
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
217 |
|
|
|
1,261 |
|
|
2,278 |
|
|
4,603 |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(19 |
) |
|
$ |
4,257 |
|
$ |
5,335 |
|
$ |
15,034 |
|
|
|
|
|
|
|
|
Net income (loss) per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
— |
|
|
$ |
0.21 |
|
$ |
0.26 |
|
$ |
0.75 |
Diluted |
$ |
— |
|
|
$ |
0.21 |
|
$ |
0.26 |
|
$ |
0.74 |
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
20,301 |
|
|
|
20,208 |
|
|
20,257 |
|
|
20,165 |
Diluted |
|
20,301 |
|
|
|
20,329 |
|
|
20,339 |
|
|
20,365 |
|
|
|
|
|
|
|
|
Cash dividends declared per
common share |
$ |
0.30 |
|
|
$ |
0.30 |
|
$ |
0.90 |
|
$ |
0.90 |
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(In thousands) (Unaudited)
|
Nine Months EndedDecember
31, |
|
|
2022 |
|
|
|
2021 |
|
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
5,335 |
|
|
$ |
15,034 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
|
2,552 |
|
|
|
2,051 |
|
Share based compensation |
|
4,987 |
|
|
|
3,040 |
|
Deferred income taxes |
|
(471 |
) |
|
|
(19 |
) |
Bad debt expense |
|
292 |
|
|
|
104 |
|
(Increase) decrease in operating assets and increase (decrease) in
operating liabilities: |
|
|
|
Accounts receivable |
|
(324 |
) |
|
|
1,216 |
|
Inventories - finished goods |
|
10,053 |
|
|
|
6,780 |
|
Prepaid income taxes |
|
(927 |
) |
|
|
(911 |
) |
Prepaid expenses and other current assets |
|
(771 |
) |
|
|
1,287 |
|
Accounts payable |
|
(3,183 |
) |
|
|
(17,613 |
) |
Accrued expenses and other current liabilities |
|
536 |
|
|
|
(1,188 |
) |
Net cash provided by operating
activities |
|
18,079 |
|
|
|
9,781 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Purchase of minority interest investment in Vetster |
|
(5,000 |
) |
|
|
— |
|
Purchases of property and equipment |
|
(3,329 |
) |
|
|
(1,266 |
) |
Net cash used in investing
activities |
|
(8,329 |
) |
|
|
(1,266 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Dividends paid |
|
(18,402 |
) |
|
|
(18,322 |
) |
Net cash used in financing
activities |
|
(18,402 |
) |
|
|
(18,322 |
) |
|
|
|
|
Net decrease in cash and cash
equivalents |
|
(8,652 |
) |
|
|
(9,807 |
) |
Cash and cash equivalents, at
beginning of period |
|
111,080 |
|
|
|
118,718 |
|
|
|
|
|
Cash and cash equivalents, at
end of period |
$ |
102,428 |
|
|
$ |
108,911 |
|
|
|
|
|
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
|
|
Cash paid for income taxes |
$ |
3,870 |
|
|
$ |
5,580 |
|
|
|
|
|
Dividends payable in accrued expenses |
$ |
1,079 |
|
|
$ |
329 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
To provide investors and the market with
additional information regarding our financial results, we have
disclosed (see below) adjusted EBITDA, a non-GAAP financial measure
that we calculate as net income excluding share-based compensation
expense; depreciation and amortization; income tax provision;
interest income (expense); and other non-operational expenses. We
have provided reconciliations below of adjusted EBITDA to net
income, the most directly comparable GAAP financial measures.
We have included adjusted EBITDA, herein,
because it is a key measure used by our management and Board of
Directors to evaluate our operating performance, generate future
operating plans, and make strategic decisions regarding the
allocation of capital. In particular, the exclusion of certain
expenses in calculating adjusted EBITDA facilitates operating
performance comparability across reporting periods by removing the
effect of non-cash expenses and other expenses. Accordingly, we
believe that adjusted EBITDA provides useful information to
investors and others in understanding and evaluating our operating
results in the same manner as our management and Board of
Directors.
We believe it is useful to exclude non-cash
charges, such as share-based compensation expense, depreciation and
amortization from our adjusted EBITDA because the amount of such
expenses in any specific period may not directly correlate to the
underlying performance of our business operations. We believe it is
useful to exclude income tax provision and interest income
(expense), as neither are components of our core business
operations. We also believe that it is useful to exclude other
expenses, including the investment banking fee related to the
Vetster partnership, acquisition costs related to PetCareRx,
employee severance and estimated state sales tax accrual as these
items are not indicative of our ongoing operations. Adjusted EBITDA
has limitations as a financial measure, and these non-GAAP measures
should not be considered in isolation or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are:
- Although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the
future and adjusted EBITDA does not reflect capital expenditure
requirements for such replacements or for new capital
expenditures;
- Adjusted EBITDA does not reflect
share-based compensation. Share-based compensation has been, and
will continue to be for the foreseeable future, a material
recurring expense in our business and an important part of our
compensation strategy;
- Adjusted EBITDA does not reflect
interest income (expense), net; or changes in, or cash requirements
for, our working capital;
- Adjusted EBITDA does not reflect
transaction related costs and other items which are either not
representative of our underlying operations or are incremental
costs that result from an actual or planned transaction and include
litigation matters, integration consulting fees, internal salaries
and wages (to the extent the individuals are assigned full-time to
integration and transformation activities) and certain costs
related to integrating and converging IT systems;
- Adjusted EBITDA does not reflect certain non-operating expenses
including the employee severance which reduces cash available to
us;
- Adjusted EBITDA does not reflect certain expenses including the
estimated state sales tax accrual which reduces cash available to
us.
- Other companies, including
companies in our industry, may calculate adjusted EBITDA
differently, which reduces the measures usefulness as comparative
measures.
Because of these and other limitations, adjusted
EBITDA should only be considered as supplemental to, and alongside
with other GAAP based financial performance measures, including
various cash flow metrics, net income, net margin, and our other
GAAP results. The following table presents a reconciliation of net
income, the most directly comparable GAAP measure to adjusted
EBITDA for each of the periods indicated:
Reconciliation of Non-GAAP
MeasuresPetMed Express,
Inc.(Unaudited)
|
Three Months Ended |
|
|
|
|
($ in thousands,
except percentages) |
December 31,2022 |
|
December 31,2021 |
|
$Change |
|
%Change |
|
|
|
|
|
|
|
|
Consolidated Reconciliation of GAAP Net Income to Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
Net income
(loss) |
$ |
(19 |
) |
|
$ |
4,257 |
|
|
$ |
(4,276 |
) |
|
(100)% |
|
|
|
|
|
|
|
|
Add
(subtract): |
|
|
|
|
|
|
|
Share-based Compensation |
$ |
1,770 |
|
|
$ |
1,440 |
|
|
$ |
330 |
|
|
23% |
Income Taxes |
$ |
217 |
|
|
$ |
1,261 |
|
|
$ |
(1,044 |
) |
|
(83)% |
Depreciation |
$ |
941 |
|
|
$ |
710 |
|
|
$ |
231 |
|
|
33% |
Interest (Income)/Expense |
$ |
(708 |
) |
|
$ |
(84 |
) |
|
$ |
(624 |
) |
|
743% |
Acquisition and Partnership Transactions |
$ |
539 |
|
|
$ |
— |
|
|
$ |
539 |
|
|
n/m |
Employee Severance |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
n/m |
State Sales Accrual |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
n/m |
Adjusted
EBITDA |
$ |
2,740 |
|
|
$ |
7,584 |
|
|
$ |
(4,844 |
) |
|
(64)% |
|
Nine Months Ended |
|
|
|
|
($ in thousands,
except percentages) |
December 31,2022 |
|
December 31,2021 |
|
$Change |
|
%Change |
|
|
|
|
|
|
|
|
Consolidated Reconciliation of GAAP Net Income to Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
Net income |
$ |
5,335 |
|
|
$ |
15,034 |
|
|
$ |
(9,699 |
) |
|
(65)% |
|
|
|
|
|
|
|
|
Add
(subtract): |
|
|
|
|
|
|
|
Share-based Compensation |
$ |
4,987 |
|
|
$ |
3,040 |
|
|
$ |
1,947 |
|
|
64% |
Income Taxes |
$ |
2,278 |
|
|
$ |
4,603 |
|
|
$ |
(2,325 |
) |
|
(51)% |
Depreciation |
$ |
2,552 |
|
|
$ |
2,051 |
|
|
$ |
501 |
|
|
24% |
Interest (Income)/Expense |
$ |
(1,213 |
) |
|
$ |
(243 |
) |
|
$ |
(970 |
) |
|
399% |
Acquisition and Partnership Transactions |
$ |
894 |
|
|
$ |
— |
|
|
$ |
894 |
|
|
n/m |
Employee Severance |
$ |
364 |
|
|
$ |
— |
|
|
$ |
364 |
|
|
n/m |
State Sales Accrual |
$ |
925 |
|
|
$ |
— |
|
|
$ |
925 |
|
|
n/m |
Adjusted
EBITDA |
$ |
16,122 |
|
|
$ |
24,485 |
|
|
$ |
(8,363 |
) |
|
(34)% |
1 Adjusted EBITDA is a non-GAAP financial measure. See “Non-GAAP
Financial Measures” for additional information on non-GAAP
financial measures and a reconciliation to the most comparable GAAP
measures.
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