PETMED EXPRESS INC Q1 FY2023 earnings call

• Acquisition Integration: Completed acquisition of PetCareRx in April 2023, integrating its catalog into operations. Optimized AI-based site recommendation engine, enhanced site experience for returning customers, and improved checkout process.
• Business Transformation: Positioned as a growth business, meeting key performance indicators such as record revenue growth, increasing new and returning customers (new customers up 25% year-over-year for three consecutive quarters), and reorder sales growth.
• Product and Service Expansion: Launched new insurance product with Pumpkin Insurance, expanded telemedicine to over 25 states with plans to expand to more states, and integrated Purina products into offerings, extending world-class brands to PetMeds' customer base.
• Financial Highlights: Record-setting year-over-year revenue growth, net new customers increased by 25% year-over-year, and recurring sales increased to 49% of total sales.

For the quarter ending June 30, 2023, sales were $78.2 million compared to $70.2 million in the prior year, an 11.5% increase year-over-year. Reorder sales were $68 million (87% of the business) with a 7% year-over-year growth. Recurring sales (including AutoShip & Save and PetCareRx membership) were 49% of total sales, up from 34% in the prior year. The PetCareRx acquisition added $2.4 million of revenue from its membership programs.

• Continue to focus on setting up the expanded product catalog to drive future organic growth.
• Realize operating synergies to improve margins.
• Leverage partnerships like Vetster and Pumpkin for value creation, with an immediate upside through expanding wallet share by selling a broader assortment of consumables.
• Declared a $0.30 cash dividend in June, balancing capital for growth with dividend payments.

• Forward-looking statements involve risks and uncertainties as actual results may differ from projections, as outlined in annual reports and SEC filings.
• Challenges in fully integrating PetCareRx operations and achieving expected synergies.
• Fluctuations in the pet care market and regulatory changes affecting telemedicine and insurance offerings.

Q: Strip out the PetCareRx business, what did the legacy business revenue look like during the quarter and how has stabilization been seen?

A: Matt Hulett stated PetMeds standalone had year-over-year growth, with the returning base starting to stabilize, focusing on selling more products to existing customers using the PetCareRx catalog. Christine Chambers added they're looking at results on a consolidated basis and the PetMeds returning base decline is starting to stabilize.

Q: One month into the second fiscal quarter, have signs of continued stabilization been seen?

A: Christine Chambers mentioned focusing on the expanded catalog driving additional reorder sales and wallet share growth for existing PetMeds customers.

Q: Expand on synergies, timing, and areas?

A: Christine Chambers said similar unit economics and gross margin assumptions, expecting SG&A cost synergies as operations are integrated, and focus on the LTV to CAC ratio with the expanded catalog.

Q: Updated thoughts on the dividend?

A: Christine Chambers said they balance capital allocation for growth vs. dividend, considering free cash flow for reinvestment opportunities.