Q3 2020 Petmed Express Inc Earnings Call

Welcome to the Pet Med Express Inc. Doing business as one 800 Pet Meds conference call to review the financial results for the third fiscal quarter.

For the quarter ended on December 31, 2020 at the request of the company. This conference is being reported founded in 1990 618 hundred pet meds as Americas, most trusted pet pharmacy, delivering prescription and nonprescription pet medications and other health products for dogs cats.

And horses directed to the customer when 800 pet meds markets its products through national advertising campaigns, which direct customers to order by phone or on the Internet and aim to increase recognition of the pet meds family of brand names one 800.

Pet Meds provides an attractive alternative for obtaining pet medications in terms of convenience price ease of ordering and rapid home delivery.

At this time I would like to turn the call over to the company's Chief Financial Officer, Mr. Bruce Rosenbloom.

Thank you I'd like to welcome everybody here today before I turn the call over to <unk>, President and Chief Executive Officer, I'd like to remind everyone that the first portion of this conference call will be listen only until the question and answer session, which will be later on the call.

Also certain information that will be included in this press conference May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, or the Securities and Exchange Commission that may involve a number of risks and uncertainties. These statements are based on our beliefs as well as assumptions we have used.

Based upon information currently available to us.

Because these statements reflect our current views concerning future events. These statements involve risks uncertainties and assumptions actual future results may vary significantly based on a number of factors that may cause the actual results or events to be materially different on future results performance or achievements express.

S or implied by these statements.

We have identified various risk factors associated with our operations on our most recent annual report and other filings with the Securities and Exchange Commission now let me introduce today's speaker minda locked on President and Chief Executive Officer of one 800 cabinets Linda thank.

Thank you Bruce.

Good morning, welcome and.

Thank you for joining us.

And at the beginning of 2021, we unveiled a brand new log on to commemorate the company's credit fifth anniversary.

Inspiration for this new work around brand identity came mostly for all the country more feedback we embraced the opportunity to refresh our brands to best represent penthouse, I vow us or our new website platform.

Now I will review the highlights of our five actually resolved, we'll compare our third fiscal quarter ended on December 31st 2020 to last year's quarter ended on December 31st 2019.

For the third fiscal quarter ended on December 31st good guys on cutting our sales were $65 $9 million compared to $59 $9 million for the same period of the prior year, an increase of that per shop.

The increase in sales force.

Creases and reorder sales.

The average order value for the quarter was approximately $8 compared to $85 for the same quarter the prior year.

For the third fiscal quarter net income was seven $6 million or <unk> 38 diluted per share compared to $6 $8 million or 30 force outside of the per share for the same quarter of the prior year, an increase to net income I'll elaborate on per shot.

Reorder sales increased by 12% for $60.2 million for the quarter compared to reorder sales for a 53 for an $8 million for the same quarter of the prior year.

We are encouraged with the continued strong reorder.

Our customer retention has increased with the help of what loyalty and easy way for programs at our new website platform.

New order sales decreased by several quotes on the.

For five point several million dollars for the quarter compared to $6 $1 billion for the same period the prior year.

However for the line losses, New order sales increased by 10 per truck.

We acquired approximately 73000 NAV calculation after our fiscal quarter compared to 76000 for the same period the prior year.

For the seasonality of our businesses due to the proportion of flea tick and heartworm medications in our product mix.

Bring a sub or a club for their peak season, but for a lot with there being the off season.

For the charge fiscal corridor our growth profit. This approach settled sales was 29, 8%.

Okay as to $29 five per share for the same period, a year ago, an improvement of approximately 25 basis points.

General and administrative expenses has approached shuttled sales, who are now quite a push out for the quarter compared for example, you walked through a shot for the same quarter of the prior year, we were able to leverage the G&A by increase sales.

For the quarter, our advertising expenses were relatively flat at $3 $2 million compared for the same quarter of the prior year.

Edward guys across the way acquiring a customer for the quarter was approximately $44 compared to $42 for the same quarter of the prior year.

And for the nine months, it was $49 compared to $53 for the light month for the prior year.

We had hardware that $6 $5 million in cash on cash cooler on.

$28 $2 million in inventory with all debt as well as December 31st two class on 'twenty.

Net cash for operations for the nine months was relatively flat at $21 $6 million compared to the non launch last year.

This ends the financial review operator, we are ready to take questions.

Thank you.

If you would like to ask a question. Please press star one.

So on a reported your first and last name clearly when prompted your name is required to introduce your questions to withdraw. Your question you May Press Star two once again at this time, if you would like to ask a question. Please press star one and.

And our first question is from Erin Wright with Credit Suisse. Your line is open.

Okay.

Thanks for taking the question.

New customer wins that we're carrying on.

But he did you go to your customer.

Thank you Pat.

How do you think.

Alright, well trained Frank.

Yeah.

Is growing well as you have seen a reorder sales increased by 12 per shot which means that the customer list that we added during the pandemic are reordering, which is a good sign.

Okay, I just follow on to that.

E program can you speak for itself.

Sorry.

In terms of traction or adoption.

Hum.

And how that's progressing relative to euro.

Expectation.

Approximately 200 per shot all the orders had the loyalty credit for them. So it's.

It's being used to fairly well.

Okay and then one last question have you contemplated.

Pardon me.

Or or other services that you can kind of rank or co marketing across your platform.

Yes, we are.

We're exploring that.

It'll be poker.

The next fiscal year, and we will give you more information on delay their bottles a year.

Okay, great. Thank you so much.

Awesome.

Our next question is from Anthony <unk> with Sidoti Your line is open.

Yes. Good morning, guys. Thank you for taking the questions. So first of all obviously, a very solid a reorder sales growth for new order sales were down.

Commando and what would you point to as to the primary reasons why our new water sales were down on the quarter.

The law because the world's bar per logs on all during the holidays.

<unk> negatively impacted our new order sales, but it's also our on peak season.

So we will be more a glass showed what our advertising.

During the peak season demand is strong.

Got it okay. Thank you and then yes. So typically in the off season, there is a sequential improvement in gross margins.

Between two Q3, Q here, where there was a little bit of a step down versus the second quarter, obviously up year over year. So just wondering if that's it.

Was there a notable change between.

The shift of the business between Rx and OTC or maybe was there I'm just wondering about the margin impact from the loyalty credit. So I mean can you just talk about the gross margin a little bit more.

Sure product mix.

A little different and as I said for the market growth of our promotional during the holidays compared for the September quarter.

Which are to be competitive we attempt to match the market.

Okay.

On the loyalty.

Did that happen.

Just wondering about the impact of that on the gross margin.

Yeah, it's ever more this promotional discounts are.

On the corridor compared to the same quarter last year.

Okay.

Lastly, on where they can loyalty credit.

Got it got it but I cant quantify that I guess at this point for them.

As far as your outlook for advertising expenses as far as new customer acquisition costs, how should we think about that.

We'll be more aggressive during peak season.

Demand is strong.

I would anticipate a double digit growth on the advertising ex spouses.

And in.

In the fourth quarter or net G as far as that Julie.

During the same season on the big season starts in March at the status on the weather conditions.

We'll see how what happens.

Alright, Thank you Robin for the best of luck.

Thank you.

As a reminder, if you would like to ask a question. Please press star one on record your first and last name clearly when prompted our next question is from Ben Rose Battle Road Research. Your line is open yes.

Yes, good morning.

Few questions to begin with Endo in terms of the rollout of the website in hand Smith's.

Is that relatively complete at this stage and what is your assessment of the improvement.

Is logical queasy at we anticipate it will be completed by.

By June <unk>.

But it will be substantially probably completed by end of March, but I would say for probably by June.

We did some a b testing a b C D testing I should say.

Comparing the new design with the old design.

We are predicting some sales lift of approximately a 2% sales are up.

Okay good to know.

<unk>.

There's been much discussion about the impact of the aging pet population, particularly with <unk>.

Pet adoptions being up over the last number of months. During Covid are you seeing any shift in your product mix that.

Which suggests that that's occurring.

Our product mix is shifting to prescriptions are about debt one by the veterinarians.

D C is coming down on the prescription is growing there is some growth for the and.

Medications.

Beyond maintenance I should say.

Okay.

Chronic asthma chronic medications.

Our growing.

Hey.

Okay.

You know you have a couple of.

Uh huh.

Customer benefits on your website that I don't think our.

And at least in my opinion that well understood, but one is the ability to offer a compound medications I know you've been doing this for quite a while day.

Do you have a formal outreach plan in place you know to reach the vets the veterinarian community to let them know about this.

We are not offering to the veterinarians, who are offering it to the our customer and.

It's filled by a third party compiled pharmacy.

Okay has it been increasing in popularity over the last.

Several quarters or.

Yes, it is okay.

And they ask for vet feature that you have on your website have you noticed an increase in the number of customer inquiries.

In terms of customers wanting to speak directly to avert about their pet can conditions.

Right or our new website redesign to ask that is gonna be law problem on so it says in the old design it was on problem.

So we anticipate that we will see more activity going forward.

Okay and another question is is there you know that marriage does have a very well established brand as I understand it.

And as a function of its net promoter score or their net promoter score reflecting that have you given any thought to developing branded merchandise for pet meds that is to say non medication pet.

Pet oriented merchandise with the pet med brand.

Yeah, we do have OTC medications are on there are grand.

We did not think about beyond two medications at the start.

Okay, and then finally, if I if I may in concert with the increase in advertising that Youre anticipating during peak season do you think we will.

See a pick up I guess two questions. One is what we see a pickup in T V advertising and then secondly will there be kind of a renewed emphasis on the brand either by way of a new brand campaign.

Yeah, you will see some more activity on TV advertising are likely.

Double our budget for all of last year.

Oh on TV Okay.

And then as far as any kind of thoughts to new new branding or enhanced branding general yet obviously, we'll use our new refresh the refresh Brad.

In our advertising.

Okay.

Okay. Thank you very much.

Okay.

And at this time I'm showing no further questions I'll turn it back to you Sir.

Thank you.

So next fiscal year will be exploring all tried to raise will require cash dollars, adding value added services and we will continue investing on our E commerce platform on mobile App to better service our customer. This wraps up today's conference call Jack you for joining us on.

For the SaaS the conference call back too.

Thank you for participating on today's conference you may now disconnect.