PetMed Express, Inc. (NASDAQ: PETS)(“PetMeds” or “Company”), Your
Trusted Pet Health ExpertTM, today announced its financial results
for its third quarter of fiscal year 2024, restated financial
statements for the years ended March 31, 2023, 2022 and 2021, and
interim financial statements for previously reported quarterly
periods in 2023 and 2022.
Quarterly Highlights
- Net sales for the quarter ended
December 31, 2023, were $65.3 million, compared to $58.9
million for the third quarter in the prior year, an increase of 11%
year over year. The increase was due to the acquisition of
PetCareRx offset by declines in PetMeds legacy sales.
- Net loss for the quarter ended
December 31, 2023 was $2.0 million, or $(0.10) per diluted
share. This compares to net loss of $212 thousand, or $(0.01)
diluted earnings per share, for the prior year quarter ended
December 31, 2022. The decrease was due to incremental G&A
in part due to the acquisition of PetCareRx as well as strategic
G&A investments in PetMeds.
- Adjusted
EBITDA1 of $924 thousand for the current year fiscal third quarter,
compared to Adjusted EBITDA of $2.7 million, for the quarter ended
December 31, 2022.
- Cash on hand
at December 31, 2023 was $49.4 million and PetMeds has no
debt.
“We are pleased to have our previously announced
restatement completed,” said Christine Chambers, CFO of PetMeds.
“This restatement resulted principally from the correction of
accounting treatment for certain prior period sales taxes between
mid-2018 through mid-2022. This restatement does not have any
impact on our anticipated fiscal 2024 revenue or gross margins or
on our cash position as of December 31, 2023. Our team has
worked diligently to complete the accounting analysis, and I want
to thank all our stakeholders for their trust and patience during
this period.”
Financial Restatement
The Company filed an amended Annual Report on
Form 10-K/A for fiscal year 2023 and amended Quarterly Reports on
Forms 10-Q/A for the fiscal quarters ended June 30, 2023 and
September 30, 2023, to reflect the correction of the misstatements
in the financial statements for the restated periods. In addition,
the Company has filed its Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 2023, which includes restated
unaudited consolidated financial statements for the three and nine
months ended December 31, 2022, that reflect the correction of the
misstatements in such periods and to make certain corresponding
disclosures. The Company is now current in all of its SEC
filings.
This restatement resulted principally from the
correction of accounting treatment for certain prior period state
and local sales tax liabilities previously accrued under the
probable and estimable standard under Accounting Standards Code
(ASC) 450, to the accrual of such liabilities instead under the
legal liability approach under ASC 405. The sales tax exposure was
originally identified and announced last year and related to sales
taxes not collected or remitted from mid-2018 through mid-2022. As
of December 2022 the Company was collecting and remitting sales tax
in all relevant states.
As a part of the restatement, the principal
adjustment on the prior balance sheets relates to the sales tax
liability that is now recorded as the full potential sales tax
liability accrued under ASC 405 and reflects sales taxes not
collected from customers between mid-2018 through mid-2022. For the
quarter ended December 31, 2023, the sales tax liability is
recorded at $24.2 million, which compares to $7.8 million that was
previously reported as of March 31, 2023 and detailed below.
The Company also recorded a corresponding
adjustment in order to reverse the sales tax liability under the
prior accounting treatment from fiscal year 2023 under ASC 450.
This reversal impacts the fiscal 2023 year-end balance sheet along
with the fiscal 2023 income statement. On the income statement, a
$7.8 million reserve, recorded in G&A, as representing the
probable and estimable amount of the sales tax liability was
reversed. This reversal occasioned by the restatement reduces
fiscal 2023 G&A expense by $7.8 million and net income as
restated is now $5.1 million, or $0.25 per diluted share in fiscal
2023. This compares to net income of $18.7 million or $0.92 per
diluted share, as restated, in fiscal year 2022. Previously, fiscal
year 2023 net income was $233 thousand, or $0.01 per diluted
share.
The Company also made an adjustment related to
the acquisition of PetCareRx and the recording of net operating
losses. Due to limitations in NOLs, deferred tax assets decreased,
and goodwill increased in the first three quarters of fiscal 2024.
This adjustment has no impact on the income statement.
The income tax provision was also adjusted based
on the changes mentioned above in each applicable period.
ABOUT PETMEDS
Founded in 1996, PetMeds is Your Trusted Pet
Health Expert, delivering pet medications, food, health services
and other products direct to the consumer at PetMeds.com and
PetCareRx.com and through its toll-free number (1-800-PetMeds).
PetMeds aims to be the most trusted pet health expert by providing
incredible care and services that are affordable to the broadest
group of pet parents--because every pet deserves to live a long,
happy, healthy life. For more information, please visit
www.petmeds.com.
PETMEDS MEDIA CONTACT
Mary Eva TredwayButin PRmaryeva@butinpr.com
PETMEDS INVESTOR RELATIONS CONTACT
Brian M. Prenoveau, CFAMZ
Group561-489-5315investor@petmeds.com
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except for share and per
share data) |
|
December 31,2023 |
|
March 31,2023 |
|
(Unaudited) |
|
(as restated) |
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
49,440 |
|
$ |
104,086 |
Accounts receivable, less allowance for doubtful accounts of $39
and $35, respectively |
|
1,930 |
|
|
1,740 |
Inventories - finished goods |
|
34,577 |
|
|
19,023 |
Prepaid expenses and other current assets |
|
8,804 |
|
|
4,719 |
Prepaid income taxes |
|
798 |
|
|
863 |
Total current assets |
|
95,549 |
|
|
130,431 |
|
|
|
|
Noncurrent assets: |
|
|
|
Property and equipment, net |
|
26,811 |
|
|
26,178 |
Intangible and other assets, net |
|
16,992 |
|
|
5,860 |
Goodwill |
|
26,657 |
|
|
– |
Operating lease right-of-use assets, net |
|
1,626 |
|
|
– |
Deferred tax assets, net |
|
5,715 |
|
|
5,009 |
Total noncurrent assets |
|
77,801 |
|
|
37,047 |
|
|
|
|
Total assets |
$ |
173,350 |
|
$ |
167,478 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
38,851 |
|
$ |
25,208 |
Sales tax payable |
|
24,172 |
|
|
26,113 |
Accrued expenses and other current liabilities |
|
5,557 |
|
|
6,191 |
Current lease liabilities |
|
752 |
|
|
– |
Deferred revenue |
|
3,068 |
|
|
– |
Total current liabilities |
|
72,400 |
|
|
57,512 |
|
|
|
|
Long-term lease
liabilities |
|
890 |
|
|
– |
|
|
|
|
Total liabilities |
|
73,290 |
|
|
57,512 |
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
2,500 convertible shares issued and outstanding with a liquidation
preference of $4 per share |
|
9 |
|
|
9 |
Common stock, $0.001 par value, 40,000,000 shares authorized;
21,160,739 and 21,084,302 shares issued and outstanding,
respectively |
|
21 |
|
|
21 |
Additional paid-in capital |
|
23,473 |
|
|
18,277 |
Retained earnings |
|
76,557 |
|
|
91,659 |
|
|
|
|
Total shareholders' equity |
|
100,060 |
|
|
109,966 |
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
173,350 |
|
$ |
167,478 |
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(In thousands, except for share and per
share amounts) (Unaudited) |
|
Three Months EndedDecember
31, |
|
Nine Months EndedDecember
31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(as restated) |
|
|
|
(as restated) |
Sales |
$ |
65,317 |
|
|
$ |
58,870 |
|
|
$ |
214,560 |
|
|
$ |
194,172 |
Cost of sales |
|
47,434 |
|
|
|
43,632 |
|
|
|
154,089 |
|
|
|
140,819 |
|
|
|
|
|
|
|
|
Gross profit |
|
17,883 |
|
|
|
15,238 |
|
|
|
60,471 |
|
|
|
53,353 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
General and administrative |
|
13,425 |
|
|
|
10,425 |
|
|
|
41,098 |
|
|
|
29,669 |
Advertising |
|
5,762 |
|
|
|
4,641 |
|
|
|
18,539 |
|
|
|
14,869 |
Depreciation and amortization |
|
1,770 |
|
|
|
941 |
|
|
|
5,161 |
|
|
|
2,552 |
Total operating expenses |
|
20,957 |
|
|
|
16,007 |
|
|
|
64,798 |
|
|
|
47,090 |
|
|
|
|
|
|
|
|
(Loss) income from
operations |
|
(3,074 |
) |
|
|
(769 |
) |
|
|
(4,327 |
) |
|
|
6,263 |
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
Interest income, net |
|
136 |
|
|
|
299 |
|
|
|
481 |
|
|
|
11 |
Other, net |
|
293 |
|
|
|
259 |
|
|
|
1,053 |
|
|
|
718 |
Total other income |
|
429 |
|
|
|
558 |
|
|
|
1,534 |
|
|
|
729 |
|
|
|
|
|
|
|
|
(Loss) income before provision
for income taxes |
|
(2,645 |
) |
|
|
(211 |
) |
|
|
(2,793 |
) |
|
|
6,992 |
|
|
|
|
|
|
|
|
(Benefit) provision for income
taxes |
|
(618 |
) |
|
|
1 |
|
|
|
(345 |
) |
|
|
1,636 |
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(2,027 |
) |
|
$ |
(212 |
) |
|
$ |
(2,448 |
) |
|
$ |
5,356 |
|
|
|
|
|
|
|
|
Net (loss) income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.10 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.26 |
Diluted |
$ |
(0.10 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
20,425,282 |
|
|
|
20,301,384 |
|
|
|
20,380,262 |
|
|
|
20,257,145 |
Diluted |
|
20,425,282 |
|
|
|
20,301,384 |
|
|
|
20,380,262 |
|
|
|
20,339,064 |
|
|
|
|
|
|
|
|
Cash dividends declared per
common share |
$ |
— |
|
|
$ |
0.30 |
|
|
$ |
0.60 |
|
|
$ |
0.90 |
PETMED EXPRESS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(In thousands)
(Unaudited) |
|
Nine Months EndedDecember
31, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities: |
|
|
(as restated) |
Net (loss) income |
$ |
(2,448 |
) |
|
$ |
5,356 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
5,161 |
|
|
|
2,552 |
|
Share based compensation |
|
5,196 |
|
|
|
4,987 |
|
Deferred income taxes |
|
(436 |
) |
|
|
(1,114 |
) |
Bad debt expense |
|
53 |
|
|
|
292 |
|
(Increase) decrease in operating assets and increase (decrease) in
operating liabilities: |
|
|
|
Accounts receivable |
|
(119 |
) |
|
|
(324 |
) |
Inventories - finished goods |
|
(12,438 |
) |
|
|
10,053 |
|
Prepaid income taxes |
|
65 |
|
|
|
(927 |
) |
Prepaid expenses and other current assets |
|
(2,664 |
) |
|
|
(771 |
) |
Operating lease right-of-use assets, net |
|
594 |
|
|
|
– |
|
Accounts payable |
|
7,929 |
|
|
|
(3,183 |
) |
Sales tax payable |
|
(1,942 |
) |
|
|
2,291 |
|
Accrued expenses and other current liabilities |
|
(1,258 |
) |
|
|
(1,133 |
) |
Lease liabilities |
|
(577 |
) |
|
|
– |
|
Deferred revenue |
|
75 |
|
|
|
– |
|
Net cash (used in) provided by
operating activities |
$ |
(2,808 |
) |
|
$ |
18,079 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Purchase of minority interest investment in Vetster |
|
(300 |
) |
|
|
(5,000 |
) |
Acquisition of PetCareRx, net of cash acquired |
|
(35,859 |
) |
|
|
– |
|
Purchases of property and equipment |
|
(3,260 |
) |
|
|
(3,329 |
) |
Net cash used in investing
activities |
$ |
(39,419 |
) |
|
$ |
(8,329 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Dividends paid |
|
(12,419 |
) |
|
|
(18,402 |
) |
Net cash used in financing
activities |
$ |
(12,419 |
) |
|
$ |
(18,402 |
) |
|
|
|
|
Net decrease in cash and cash
equivalents |
|
(54,646 |
) |
|
|
(8,652 |
) |
Cash and cash equivalents, at
beginning of period |
|
104,086 |
|
|
|
111,080 |
|
|
|
|
|
Cash and cash equivalents, at
end of period |
$ |
49,440 |
|
|
$ |
102,428 |
|
|
|
|
|
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
|
|
Cash paid for income taxes |
$ |
43 |
|
|
$ |
3,870 |
|
|
|
|
|
Dividends payable in accrued expenses and other current
liabilities |
$ |
1,498 |
|
|
$ |
1,079 |
|
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 |
|
Increase (Decrease) |
($ in thousands,
except percentages) |
December 31,2023 |
|
December 31,2022 |
|
$ |
|
% |
|
|
|
(as restated) |
|
|
|
|
Consolidated Reconciliation of GAAP Net (Loss) Income to
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Net loss |
$ |
(2,027 |
) |
|
$ |
(212 |
) |
|
$ |
(1,815 |
) |
|
856 |
|
% |
|
|
|
|
|
|
|
|
|
|
Add (subtract): |
|
|
|
|
|
|
|
|
|
Share-based Compensation |
$ |
1,707 |
|
|
$ |
1,770 |
|
|
$ |
(63 |
) |
|
(4 |
) |
% |
Income Taxes |
$ |
(618 |
) |
|
$ |
1 |
|
|
$ |
(619 |
) |
|
n/m |
|
|
Depreciation and Amortization |
$ |
1,770 |
|
|
$ |
941 |
|
|
$ |
829 |
|
|
88 |
|
% |
Interest (Income) Expense, Net (1) |
$ |
(136 |
) |
|
$ |
(299 |
) |
|
$ |
163 |
|
|
(55 |
) |
% |
Acquisition/Partnership Transactions and Other Items |
$ |
– |
|
|
$ |
539 |
|
|
$ |
(539 |
) |
|
(100 |
) |
% |
Sales Tax Expense (Income) |
$ |
228 |
|
|
$ |
– |
|
|
$ |
228 |
|
|
n/m |
|
|
Adjusted EBITDA |
$ |
924 |
|
|
$ |
2,740 |
|
|
$ |
(1,816 |
) |
|
(66 |
) |
% |
(1) |
Included in interest (income) expense is $423 thousand of interest
expense related to the sales tax liability and $559 thousand of
interest income for the three months ended December 31, 2023 and
$409 thousand of interest expense related to the sales tax
liability and $708 thousand of interest income for the three months
ended December 31, 2022. |
|
Nine Months Ended |
|
Increase (Decrease) |
($ in thousands,
except percentages) |
December 31,2023 |
|
December 31,2022 |
|
$ |
|
% |
|
|
|
(as restated) |
|
|
|
|
Consolidated Reconciliation of GAAP Net (Loss) Income to
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(2,448 |
) |
|
$ |
5,356 |
|
|
$ |
(7,804 |
) |
|
(146 |
) |
% |
|
|
|
|
|
|
|
|
|
|
Add (subtract): |
|
|
|
|
|
|
|
|
|
Share-based Compensation |
$ |
5,196 |
|
|
$ |
4,987 |
|
|
$ |
209 |
|
|
4 |
|
% |
Income Taxes |
$ |
(345 |
) |
|
$ |
1,636 |
|
|
$ |
(1,981 |
) |
|
(121 |
) |
% |
Depreciation and Amortization |
$ |
5,161 |
|
|
$ |
2,552 |
|
|
$ |
2,609 |
|
|
102 |
|
% |
Interest (Income) Expense, Net (1) |
$ |
(481 |
) |
|
$ |
(11 |
) |
|
$ |
(470 |
) |
|
4273 |
|
% |
Acquisition/Partnership Transactions and Other Items |
$ |
1,294 |
|
|
$ |
894 |
|
|
$ |
400 |
|
|
45 |
|
% |
Employee Severance |
$ |
408 |
|
|
$ |
364 |
|
|
$ |
44 |
|
|
12 |
|
% |
Sales Tax Expense (Income) |
$ |
(1,088 |
) |
|
$ |
344 |
|
|
$ |
(1,432 |
) |
|
(416 |
) |
|
Adjusted EBITDA |
$ |
7,697 |
|
|
$ |
16,122 |
|
|
$ |
(8,425 |
) |
|
(52 |
) |
% |
|
|
|
|
|
|
|
|
(1) |
Included in interest (income) expense is $1,268 thousand of
interest expense related to the sales tax liability and $1,749
thousand of interest income for the nine months ended December 31,
2023 and $1,202 thousand of interest expense related to the sales
tax liability and $1,213 thousand of interest income for the nine
months ended December 31, 2022. |
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.
PetMed Express (NASDAQ:PETS)
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From Jun 2023 to Jun 2024