Q1 2022 Petmed Express Inc Earnings Call
Welcome to the partners conference call to review the financial results for the first fiscal quarter ended June 30th 2022 at.
At the request of the company. This conference call is being recorded.
Founded in 1996 put messenger trusted pet health experts, delivering prescription and nonprescription pet medications and other health products for dogs cats and horses direct to the customer.
<unk> markets its products through advertising and promotional campaigns, which direct customers to order online or by phone and which are intended to increase the recognition of the pet meds brand name.
Pet beds 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 and I'd like to welcome everybody here today I would also 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 in the call.
Also certain information that will be included during this call 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.
Since 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 results could differ materially from those projected the company undertakes no obligation to update these statements based on subsequent events, we have identified various risk factors associated with our operations in our most recent annual report and other filings with the Securities and Exchange Commission.
Let me now introduce our CEO and President Matthew It Matt.
Thanks, Bruce Good afternoon, and thank you for joining us for our fiscal 2023 first quarter call. As a reminder, pet meds pioneer would be online pet prescription business over 26 years ago and this is a legacy of which everyone at pet meds is very proud.
I approach the one year mark since taking over as CEO and President I continue to believe that pet meds is a terrific company with a talented and dedicated workforce, serving a large and loyal customer base that supports our vision that every pet deserves to live a long happy healthy life my commitment to all of our stakeholders is gonna be.
And transparent, particularly as it pertains to our progress with engineering the transformation of this iconic company.
Today, I will break the call into four themes, one an update on our core business to an update on our partner strategy.
Three a major change to our management team and for the progress on our business transformation.
So let's start with an update on our core business.
As we mentioned in our last call. We saw a slow start to flea and tick season due to seasonally colder temperatures, which continued into the early part of the most recent quarter.
Due to the high concentration of our business and flea and tick and heartworm medications. The slower sales of these products in the month of April in particular had a material impact on the quarter. Once warmer temperatures returned to much of the country stimulating more normal flea and tick and heartworm medications demand from pet parents, we saw the expected rebound of a repeat base.
This later in the back half of the quarter.
First quarter sales were $70 2 million compared to sales of $79 3 million for the same period the prior year.
While we are disappointed with the overall sales results for the quarter. We are encouraged by the sales generated from our recurring base of customers in mid May and June .
Adjusted EBITDA for the first quarter was down 10% year over year.
We haven't produced the results in net new customer growth, but I remain optimistic that the combination of the new team.
Media allocation and refreshed creative will start to stimulate profitable new customers.
Expanding from a business that was primarily optimized to market to existing customers to a business that also includes a focus on generating new customers will take some time.
The slow start to our flea and tick season. This spring also had an impact on our ability to attract new customers.
There were simply fewer buyers for our seasonally sensitive product catalog. However, we did start to see improvements in new customer acquisition towards the end of the quarter.
We continue to invest in our infrastructure, including processes systems and people and you will note that general and administrative expenses increased on a year over year basis. These are very targeted investments, which we strongly believe will grow long term shareholder value. In fact, we have partnered with a number of well seasoned third party resources.
<unk> known and trusted by me and my team, particularly with regard to turnarounds to cost efficiently and quickly improve our E. Commerce site delivery usability testing data analytics capability and more for instance, we have just enabled a new data warehouse that we call pet house that gives us deep insights into our first.
Party data that spans our 26 years.
On the marketing front, we have intentionally kept our variable marketing spend relatively flat year over year again since April was slower due to unseasonably low temperatures, we determined that it wasn't prudent to spend against slower demand our LTV to CAC number will be dynamic, but profitable as we test and learn our new customer.
Count for the quarter was approximately 69000 and our LTV to CAC for the quarter was 1.5 to reiterate we believe the LTV to CAC is a more meaningful measure of the marketing value creation versus using pet meds traditional Roe as a metric.
We expect to see this LTV to CAC number grow as we migrate more of our returning customers to our auto ship subscription program.
And as we expand average order value over the life of our customers.
Our auto ship program continues to grow approximately 34% of our revenue was recurring revenue derived from our auto ship subscription program during the June quarter.
We will be announcing some exciting new enhancements to our subscription program that we will address later on.
During our last earnings call, we discussed our recent investment in partnership with Baxter, a pet Telehealth company that connects pet parents with license veterinarian professionals all over North America. Today, we are even more excited about this partnership and are making a ton of progress on our go to market and partner integration I will.
Spend more time detailing the progress later on this call.
We are rapidly moving on the execution of our pet health expert strategy with the first building block of the strategic pillar being telemedicine.
We have many other initiatives and partnerships underway that we plan to disclose any future date.
Lastly, I would like to announce a significant new addition to the team and executive to the company.
Over the last several quarters, we've spent a great deal of time discussing our new strategy processes products and people in terms of people. We have invested in and expanded leadership team that has experience with both digital transformation and scaling a company. We have added several new executives in the last six months.
I am pleased and excited the latest member of my team Christine Chambers, who officially joins us as pet Meds, New Chief Financial Officer on August 3rd.
You will get the chance to hear from Christine on our next call as of course, she will be participating in our earnings calls going forward.
Steve is a seasoned finance professional with extensive experience transforming public and private companies. He was most recently the chief financial officer at real networks. Prior to this Kristina and I worked together closely when she was the senior Vice President of Finance at Rosetta Stone incorporated.
She has extensive and relevant experience that I'm confident will help pet meds start to regain growing market share and I am personally delighted that Kristine is joining our executive team.
The board of directors and I would like to thank Bruce Rosenbloom for its myriad of contributions to pet meds for over 20 years with an intense dedication to the company Bruce has made a substantial impact as the chief financial officer for over 20 years.
The board of directors and all the team members that pet meds. Thank him for his service Bruce will be officially staying on for several months in a consultative capacity to ensure a smooth operational handoff.
Bruce for all you've done.
Now, let us dive deeper into the details with the presentation material as always we like to feature pictures of our customers and employees pets in our slide deck, you'll see many original picture throughout this presentation, starting with this slide which features my dog Harry a pet meds customers. Since he was eight weeks old let us start with a look at the current market.
And our perspective on the overall opportunity.
As we covered in our previous earnings calls pet Meds operates in a very large and growing addressable market. The total U S. Pet market is over 100 billion in annual sales and it is expected to reach 120 billion by 'twenty 'twenty four the addressable pet medication market, where we participate today is approximately $10 billion and.
Also growing rapidly.
We're actively working on improving and growing our core business and that addressable market. While also setting our sights on expanding our addressable market into the broader wellness market, which is estimated to be over $30 billion.
Today, we are one of the leading and most trusted pet pharmacies pet Meds is also an important part of the strategy of many of the Pep platforms and players in the industry as I have learned there are not many truly reliable online prescription providers for these pet platforms and players to partner with which puts us in an enviable position.
Our core asset and demonstrated competency around prescriptions enables us to move much more quickly to execute on a broader pet health expert strategy.
We also operate in a market that is growing with underlying behavioral trends that are favorable to digital retailers and it is a great time to be in our pet business. We also know that the pet vertical is more resilient than other verticals when theres a financial downturn in particular it is a great time to be a retailer that is focus on essential consumables.
U S household pet ownership has increased over time and today seven out of 10 U S households have a pet in a post COVID-19 world. Those pet parents are going to need and will seek out health and wellness care provided by a trusted brand pet meds is uniquely positioned to take advantage of this trend.
Pet parents and their pets as an extension of their own families and they are increasingly demanding more healthy pet care options. We see this as a positive trend for pet meds and an opportunity for growth.
Early align with the trends in human health Pet parents are thinking through the entire spectrum of their pets' care from diet to veterinary services and from infancy through old age well, some well known retailers enter the market by means of pet food burst and then expanded pet meds started first and the most difficult RF.
And of the market and we are now expanding out.
To that end, we intend to move much more aggressively this year in expanding our product assortment and catalog, we see significant compounding upside in the form of increasing recurring sales, increasing customer loyalty and increasing share of wallet by providing a broader non medication product assortment to pet owners.
Lastly, the pandemic accelerated the increasing trend for the Digitization of health care.
Specifically in the pet market regulations related to in person veterinarian visits and prescription fulfillment. We're temporarily waived for the first time during Covid and these services moved online in unprecedented ways pet.
Pet Meds is ahead of the curve on this trend with our strategic partnership and investment in Pet telemedicine Investor with this groundbreaking partnership. We believe we are enabling the first real mainstream pet telemedicine platform and the one that will prove to be an accelerator of widespread adoption of pet Tele medicine.
During the last earnings call, we discussed some key pet meds Differentiators I want to reiterate those because they are important and I believe they provide a real edge for our company's transformation first our brand is both widely known and trusted our own market research indicates that 55% of U S pet.
Parents are aware of the pet meds brands, having a strong brand takes years to develop and our customers look to pet meds as their trusted pharmacy and pet medication expert.
We will be leaning more into the brand and our external communication with more dynamic and relevant messaging and new channels to take advantage of our large brand goodwill.
Second we have strong operational and quality efficiency as a pharmacy the customer care integration with their pharmacy is world class, which ensures that customers get their products delivered as promised quickly and accurately. Additionally, our vet partners reliably receive quality service delivered through that platform.
We will be looking to expand our vet network and provide enhanced service to them with new technology delivered through our partnership with Pepsi.
Our deep experience with the vet community is a significant competitive advantage.
We have one of the largest direct to consumer bet networks and the online retail space with over 70000 veterinarians that we have worked with over the company's history.
Currently our online portal has 17000 active veterinarians in vet clinics.
Said in earlier earnings calls this is a core capability and a unique asset because it enables us to expand our fulfillment capability as we scale our business. Our intent is to drive incremental revenue through a powerful platform offered to our vet partners in the near future, we view that as our partners and jointly providing a greater array of pet health services.
To that end, we will continue working together holistically to improve that ability.
The ability to care for pets.
Ultimately, we believe if we help vets the profits for both the vet and per pet Meds will follow.
Our pet pharmaceutical category expertise is something that I view as a towering strength.
Many retailers can sell dog food, but few can provide medication and sound health advice at scale.
I've said before being a differentiated pet medication provider allows pet meds to excel and our health and wellness offering and continue to be viewed as trusted pet health experts, especially as the market continues to become even more competitive.
<unk> currently enjoys a close and strategic bond with our many supply partners and those relationships have developed over time, they become even more strategic.
We have direct relationships with all of our major suppliers and we've worked together closely to effectively market their products to our customer base.
Our customer service and overall customer Centricity ethos permeates, our culture and has demonstrated throughout our team.
We provide a 100% satisfaction guarantee and we go the extra mile for our customers with truly empathetic and expert service.
We don't just have a transactional interaction with our customers. We have built trusting genuine relationships, our customers view pet meds as their trusted pet health expert and we take that responsibility seriously.
I recently had the pleasure of receiving an email directly from our customers concerning a phenomenal interaction with one of our customer care reps, here's what they had to say.
Dear Mr. Here with the purpose of my letter is to bring your attention to my experience with remembered your team Jennifer during my call with your company yesterday.
Having the need to reorder Riley's My dog monthly Med I called your company yesterday and was connected to Jennifer for knowledgeable professionalism and patience with me where outstanding being disabled without income and living on my savings I had a lot of questions about different meds and the different ways I might be able to save some money.
I'm sure my time with Jennifer probably extended past company policy regarding time as most places you call. They rush you on and off the phone only wanting to take an order and get to the next customer. This was not the case I had a lot of questions and Jennifer was so patient and kind and assured me. She was there to help me and that she was going to do.
For time with me on the phone yesterday was it a great example of our dedication to pet meds and her love for helping others I'm very impressed and thankful for her time in patients with me again. Thank you for your company's outstanding service with the many different choices that are available to us to choose our men for animals I can tell you is the folks like <unk>.
Jennifer that will keep them coming back should I have an opportunity to refer others be assured it's pet meds, where I will be sending them too.
Jennifer is a perfect example of our employees' dedication to our customers and their personal wellbeing and I'm delighted to share this story and recognize Jennifer in all of our colleagues for their exemplary customer service.
Pet Meds has historically been a somewhat low growth yet high dividend based company and we are proud to have created an returned so much value to our shareholders. We are intent however, upon becoming a higher growth company to create even more value and we believe we are in a great position to do that.
Pet meds is profitable with a pristine balance sheet, we do not have any debt.
We have approximately $105 4 million in cash and cash equivalents as of June 32022, and we are cash flow positive pet.
Pet Meds is moving much of our business from a transactional direct to consumer model to a subscription business subscription businesses are clearly compelling business models due to their predictable and stable recurring cash flows as I mentioned at the beginning of the call. We ended the June quarter was approximately 34% of our customers enrolled in ordering via our auto show.
And save subscription program.
We continue to have a large base of returning customers, which is an indication of the quality service and the value that we deliver we are fortunate to have a large base of 2 million pet parents that are purchased from us over the last two years.
We have over 26 years of experience as a pure play pet pharmacy fully licensed in 50 states delivering outstanding service and value. This domain experience is what I would call. The more complicated part of the pet ecosystem, which makes our progression into other segments much easier.
Our customers just love our brand and our service our NPS score is over 80, which puts us in the upper quartile along with some of the most beloved brands in the world.
Now I'd like to have Bruce review, our financials for the quarter.
Thanks, Matt.
During the review of our financial results, we will compare our first fiscal quarter, which ended on June 30 of 2022 to last year's quarter that ended on June 30 of 2021 I.
I would also like to highlight that we introduced new non-GAAP financial metrics during our last fiscal year, adjusted EBITDA and adjusted EBITDA per share.
We decided to include these new metrics because they are key measures used by management and by our board to evaluate our operating performance generate future operating plans and make strategic decisions regarding the allocation of capital.
Additionally, adjusted EBITDA and adjusted EBITDA per share provide a more accurate picture of our underlying profitability and also take into account the more recent increases in non cash stock based compensation and other expenses.
Throughout our most recent fiscal year, we faced a unique situation comparing two totally different environments between 2020 pandemic in 2020, one mostly post pandemic as we move forward into our current fiscal year the year ending March 31, 'twenty twenty-three with our new marketing partnerships agencies.
Processes, we expect to be much more efficient with our variable marketing spend with improved results and with many of our highlighted initiatives firmly in place.
For the current year first quarter sales were $17 2 million compared to sales of $79 3 million for the same period in the prior year.
A decrease of 11, 5%.
Matt mentioned earlier, while we were disappointed with the sales decline year over year, we were encouraged by the sales trends. We saw later in the June quarter.
Reorder sales decreased by seven 8% to $63 3 million for the quarter ended June 30 of 2022 compared to reorder sales of $68 7 million for the same quarter. The prior year using a consistent 36 month definition of a new customer.
With the increasing auto ship subscription adoption, we see more opportunities to continue to build our relationships with our loyal customer base. We will also work to continue to improve our reorder sales by marketing to our customer base with increased product offerings and services.
During the June quarter, we made a change to the methodology of how we calculate the percentage of revenue that was generated by our auto ship and see your program going forward. We will report auto ship net of discounts and credits and we will also report the average of our auto ship attainment over the quarter versus the last.
A quarter.
Please note that this change to the calculation resulted in a decrease to the auto ship percentage that was previously reported by only a few percentage points. We believe that this change reflects a more accurate representation of our subscription business for stakeholders to gauge his performance.
We are encouraged by the adoption of this program and have seen an increasingly positive trend over the last several quarters. Since we launched this program for example, our quarterly auto ship percentage increase from 20% in the December quarter to 31% in the March quarter and averaged 34.
For scent for the most recent quarter ended June 30th 2022.
For the first quarter of fiscal 'twenty to 'twenty three our gross profit as a percentage of sales increased by approximately 95 basis points to 28, 4% compared to 27, 5% for the same period a year ago.
Some of the major manufacturers shifted their funding from cooperative marketing rebates and discounting product cost to funding discount promotions, which support our auto ship and save subscription program.
There may be an opportunity to improve gross margins in fiscal 'twenty to 'twenty three if the shift to prescription medications continue.
And we can grow future sales for the appropriate price promotions.
Net income was $2 8 million or 14 cents diluted earnings per share for the first quarter of fiscal 2023 compared to $4 4 million or 22 cents diluted earnings per share for the same quarter last year.
Adjusted EBITDA for the first fiscal quarter was $6 3 million or 31 cents on a diluted basis compared to $7 1 million or 35 cents on a diluted basis for the same quarter last year.
Adjusted EBITDA and adjusted EBITDA per diluted share add back certain noncash expenditures, including stock compensation interest income and expense income taxes, depreciation and amortization and other expenses like the investment banking fee related to the vets.
For partnership.
Again, adjusted EBITDA and adjusted EBITDA per share our non-GAAP key measures used by management and our board to evaluate our operating performance generate future operating plans and make strategic decisions regarding the allocation of capital we will continue to disclose these finance.
Measures and our future filings.
As a result of the intentional and strategic investments in head count and infrastructure made over the past year, we have seen double digit percentage increases in general and administrative expenses.
Strongly believe these investments are necessary for our transformation and we intend to continue to make prudent investments in the business to fuel and support future growth.
The June quarter, we spent approximately $982000.
And capital expenditures with the majority of the spend related to the customization of our ecommerce platform and our new data warehouse.
We expect to see a continued investment in capital expenditures to the tune of approximately $4 million for the remainder of fiscal 2023, which will be utilized to further customize our ecommerce platform and infrastructure.
We had $105 4 million in cash and cash equivalents and $22 6 million in inventory with no debt as of June 30 of 2022.
The company continues to be committed to returning capital to our stockholders as such the board of directors declared a quarterly dividend of <unk> 30 per share on the company's common stock that will be payable on August 19, 2022 to shareholders of record at the close of business on August 12 2022.
Two of them.
Also please note that the declaration and payment of future dividends is discretionary and will be subject to a determination by the board of directors each quarter.
Now I'd like to hand, the presentation back over to Matt.
During our last earnings call, we revealed our long term strategy with some degree of specifics.
Pet Meds is moving from being just a leading pet medication retailer to being a market leader and expert pet health care.
We envision a world where the majority of that services in Petcare move to digital we are in the early days of this digital transformation, but it is coming rapidly. We believe that a digitally enabled and data driven feature will be the preferred mode of delivery for pet parents.
We have taken important steps towards executing on our long term strategy starting with our recent announcement that we've made in the telemedicine space. The strategic pillars that will be executing on our nutrition medications wellness and care with data, both driving and being at the heart of our services.
Our recent announcement with Baxter is the first building block of our care offering.
In the last call. We discussed how this partnership is a real unlock in both technology and E Commerce integration, which provides a powerful combination that has never been introduced in the pet category, we see a monopoly of upsides and opportunities including.
First mainstream launch we believe we are the first company to introduce pet telemedicine to the mainstream connecting 2 million pet parent customers with over 70000, veterinarians and pet Meds network.
Close the loop.
Correct connect access to a telemedicine experience that closes the loop between the pet parent and if that so that the prescription medication can be prescribed directly to a pet parents in many cases without the need of an in office visit.
New revenue streams. This partnership creates new revenue streams within pet meds and the potential for new revenue streams from traffic driven from investors platform.
Go to market acceleration.
Unique investment and partnership terms allow pets to accelerate our go to market on our new strategy. For example, pet manageable leverage Divesture platform can provide virtual vet clinic services embedded with our pet medication and retail platform directly into their platform.
Climbing up the sales funnel.
We believe that offering telehealth will enable us to acquire new customers and to create more incentives for pet med subscribers.
<unk> customers will be able to get instant care, whether that is via text or live video chat with your vet or with any of that provider through an exclusive that marketplace access on your smartphone or desktop 24 seven.
Veterinary Alliance, we think that this partnership is a huge win for bets too. We believe this partnership will allow us to provide attractive capabilities and additional revenue streams and work flexibility to our core of that network and beyond.
Since signing our agreement just several months ago, we have already moved very quickly towards integrating pet meds investors core technologies, we have already integrated to services into each other's platform, which include pet meds integration pet Meds catalog Rx and E. Commerce capability is now directly integrated into that stir that means that now.
For any customer that has a direct veterinary relationship or resides in a state that allows for digital prescription fulfillment any bet on investor will be able to triage diagnose and then prescribed medication directly from a computer or mobile device.
This level of integration happens directly as a virtual appointment the data from the prescription and the overall appointment is integrated into the pet parents personal pet health dashboard.
This innovation means that as virtual care increases for pets.
<unk> can become the engine that powers the ecommerce transaction behind this trend.
That lives that live is a new experience that will be rolling out over the next several months and the first of many services that we'll be launching over the quarter.
That live as an exclusive veterinarian marketplace integrated directly inside the pet meds that lives connects pet parents to thousands of licensed veterinarians ready to provide the best online vet services through a video chat appointments 24 seven.
I think about virtual care the way some entrepreneurs thought about the App store is it potential to reach out to a global audience instantly. The companies that didn't have the foresight to take advantage of a platform change like this missed out on a huge value unlock.
Access to an exclusive network of extraordinary that care providers is a very high engagement and high value proposition for pet parents, and we believe this will be a very sticky offering.
And this is just one of many examples of how we believe we are building a very compelling platform for the next big trend and pet health.
We have made substantial and measurable progress on our transformation of the business over the last several quarters and we remain laser focused on execution.
Now that we have the majority of the new people process and strategic elements of the business underway Heres. What you can expect from US over the next couple of quarters in terms of our organic and inorganic growth focus.
Improvement in new customer growth.
We'll be expanding and accelerating our new customer acquisition afterwards, which are critical to our long term success.
Continued migration of our business to a recurring subscription model.
More active deployment of our capital there are exciting opportunities for us to leverage capital to accelerate our transformation through investments partnerships and acquisitions.
Full rollout of our pet telemedicine capability into the market, we will start to execute on the deployment and expansion of our integrations and partnership with Baxter.
Expansion of product catalog and services.
This includes a much wider product assortment as well as adding more health and wellness services to our business.
Commitment to ESG.
This year, we initiated our environmental social and governance commitment a great example of this is our Ukraine pet relief effort that we launched with iPhone as well as our longtime continued support of many U S based pet rescue and Humana organizations pet.
Pet meds firmly believes that we cannot consider ourselves successful as a business if our team members our communities and our planet do not drive as well our strategy is still in the early stages of development at the heart of our commitment is giving back of pets people and our planet.
I can't stress enough that it takes time to transform the company, especially in a highly competitive market and in an uncertain economic environment, but our market opportunity is clear and it is compelling I'm confident that the foundation that we have been laying will meet that market opportunity and unique and innovative ways and will lead to increased operating <unk>.
<unk> and shareholder value.
Pet meds brand expertise and reputation of our unparalleled our balance sheet is strong our team is fantastic and I am more excited about the future than ever. This ends our prepared remarks, operator, we're now ready to take questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star Q1 moment. Please while we poll for questions.
Thank you. Our first question is from Erin Wright with Morgan Stanley . Please proceed with your question.
Hey, Thank you for taking the question can you give us an update on where we stand now with the flea and tick season, where those sales just lost or does it shift to the next quarter and in what are you seeing now on that Brian and I think he used to give that quarterly sees no waiting as of what we considered seasonal products.
What does that cadence look like or what do you expect it to look like this year compared to historical trends from an economics perspective.
Yeah.
Hi, Aaron This is Matt. Thanks for the question Great to hear from you a.
Couple of things about the quarter.
It started out.
Pretty slow, especially compared to March you indicated that that March was slow due to seasonality around the temperatures being called and it continued into April and then it really progressively rebounded on a returning business through may through June and continues through July so we're pretty confident that parasiticide business.
Pet meds is recovering very nicely.
And that's kind of maps to what we've seen in other supply chains and other partners that we've talked to.
And it's very similar to what we've seen and subsequent.
Historical practices in the business since we've been around for 26 years, we have some a lot of data around this.
Answer your question a point of why we use this as an extension to the season.
Typically a six month season were heavily weighted towards flea and tick and heartworm and so we view the season being extended out.
Versus contracted.
Bruce do you have any other follow up comment.
No Matt I think you covered everything there.
Okay got it thanks, and then more broadly how are you thinking about pet spending in a tougher macro backdrop and are you seeing any changes in customer behavior for instance in terms of trade down on products or our pet owners moving from six months, we intake packs to three months or has anything.
I'll changed or would be indicative of the changing consumer.
Yes, Eric Great question.
And we hope that changes in the future as you know we're highly medication heavily Rx focused and the good news about that is customers are very brand specific and brand loyal intend to not trade down.
We've maybe seen a little bit of impact on people trading down in terms of dosage, but not much in it.
This category, we're seeing not a lot of movement. There I think as we start thinking about broader consumable products, maybe food and other items, we will see some of that trade down but in terms of brand loyalty to our acts in particular, we have not seen a trade down behavior, Bruce anything to add there.
Historically when times have been tough and again I've been with the company through a few different downturns.
You may see.
Pet owners instead of buying a six months supply buying a three month supply. So are trading down from that perspective are stretching out the medication, we haven't seen that yet, but that's some behaviors we haven't seen in the past.
So just something that will keep tabs on them, but as of right now the theater has not shown any significant changes.
Okay and one just housekeeping question did you give new customer growth, our total new customers acquired in the quarter.
We did 69000.
Okay got it. Thank you you bet an add on to that Aaron since we are so highly concentrated to Rx, particularly flea and tick and heartworm April just to be blunt with not a great.
To be acquiring those customers since the Earth was pretty cold. So we were pretty getting very optimistic actually about our new customer acquisition.
Initiatives underway, especially later in the quarter, So we expect to see.
Improvements throughout our calendar year on new customer acquisition, where were getting more optimistic there.
Okay. Thank you.
Thanks Sharon.
Thank you. Our next question comes from Corey Grady with Jefferies. Please proceed with your question.
Hi, Thanks for taking my question I wanted to follow up on your customer acquisition initiatives.
Are you testing new creative across the new channels during the quarter can you give us maybe more detail on our results. We're seeing so far and where you are in terms of the marketing transformation.
Yeah.
Hey, Corey this is Matt. Thanks, Thanks for your question and thanks for hosting US recently your conference it was fantastic.
I won't go into the specific channels, but I think in the meta macro level.
We're definitely seeing rates.
Get to a more normal <unk> in some cases lower rates year over year, which is which is great news.
<unk> typically seen in some environments, they get more macro challenge, but definitely on the performance marketing channels, we're definitely seeing.
Or stabilization in some cases reduction of rates.
Some channels are still high I think we all know the issues around social but.
Are we seeing a rationalization and races, I think growth oriented companies have readjusted, how they think about their media mix I think that that is only going to be a net beneficiary for per pad.
And then that's kind of the macro to micro on US is as you know and we spent some time talking about this that.
10 minutes for a long time is focused on.
Lower the final 8-K, a performance marketing to its returning base and since we had a new CMO and new partner is starting about six months ago on our new strategy, we've definitely moved that shifts to lean more into our brand and we've seen it.
Really strong results there we expect those to continue and over this calendar year, we expect to see net new customer growth due to those efforts and we're feeling more optimistic about them.
Did I answer your question Corey.
Yes, that's really helpful.
And for my second question I, just following up on the flea and tick so given the known kind of flea and tick weakness coming into the quarter, how did reorder sales.
Come in relative to your expectations and then have you guys seen any change in seasonality to the vet industry that would typically precede a change in your reorder business.
Yeah Cory thanks, Thanks, a lot for that the first I'll answer the first question first.
Well if you asked me in April how are they feeling about the quarter I wouldn't have been very optimistic and then subsequently may and June got a whole lot more optimistic so the.
The quarter recovered to where we were expecting it to be and that continues into July on the returning side.
Again, the new customer acquisition side was a little slow to warm up because the buyers weren't there and in terms of the best cycle. We do tend to look a lot like the that cycle in terms of.
Concentration of revenue, but also.
The patterns for consumers with pet meds is that.
Typically I guess, the first prescription and we get the secondary we actually haven't seen that as much as things start to recover that we're starting to see the similar cycles, even with the seasonality with colder temperatures. So don't think thats going to be much of a headwind for us as we come into this next quarter Corey I don't know if that answered your question or not.
It does that's helpful. Thank you.
Yeah.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Kim.
Our next question is from Anthony <unk> with Sidoti <unk> Company. Please proceed with your question.
Good afternoon, and thank you for taking the question so.
As far as if I look at the traditional way of how pet meds talked about the advertising.
Advertising, a new customer acquisition costs.
That was it looks like about $92 for the quarter.
How should we think about that.
That number kind of going forward.
Matt.
More about LTV to CAC, but I guess.
For all of Us old timers with cover the stock for a long time, how should we think about that.
But on a go forward basis.
And Anthony you are referring to $92 as the absolute number for Capex.
Right, Yeah, so if I take the advertising dollar amount divided by the new number of new customers, which was.
So just disclose as far as 69000, he said so that comes out to $92.
I just wanted to make sure when you look at the same song sheet.
In terms of the absolute number for CAC.
Were actually are feeling better about that if you are asking a directional question. So it's been higher for US as you know my first and a CMO for the business, whether the best quarter for cash for the company.
I'll hand that to a more.
More pressure CMO, but the CAC number for us.
Is.
Stabilized, there's actually decreased a little bit new to this media mix. So on a go forward basis, we're not thinking about.
And targeting CAC is the metric that we talk about that since it's easy to calculate it it's actually been relatively stable and going down.
LTV number has been pretty stable as well.
But we hope that over time with recurring revenue and a broader catalog that just goes out because we get more.
More opportunity to sell more products and get more engagement.
A broader array of products. So I think LTV goes up over time, and then I think right now Anthony to answer your pointed question I think $92.
Or maybe a little bit lower over time, it's been it's been going down as we've gotten smarter about our media mix.
And also I think the current macro environment.
And it hasn't been increasing as much with his worried us in the past so I hope that's helpful.
Pagan I can't predict what absolute number it's going to be other than we've seen market improvement month over month week over week.
And it's starting to stabilize in terms of price increases so we're feeling better about the CAC environment.
Okay that sounds good okay, so and I know, it's still early as far as the relationship with Baxter, but can.
Can you give us how do you sort of color as far as you know.
Because we have to I don't know if you want to talk about the specifics, but as far as you know but.
Customers actually you know your own customers, using Webster or vice versa that store customers using pet meds to fill their order. So can you give us any sort of additional color or details on that.
Yeah.
The first integration, we did was to embed pet meds.
Private label inside of that stir investors are startups, so really they have a small amount of traffic right now.
But it was a good Watson are you there a moment to determine whether it works or not and.
It works in a and B customers are really delighted by the overall service and I encourage everyone who is listening.
It's really fantastic secondarily, the big launch for Us where volume will start.
Increasing and also getting more exposure on our site and our mobile products will be that live in that live will be the investor marketplace private labeled inside of our patent that's properties and that'll come in the next several months that'll be the opportunity for us to really do some interesting things. The first part is just to engage with a pet health pet telemedicine.
Appointment live on the site. The secondary component is there's a whole host of other sub services or we're going to be launching some will be an auto ship and the others will be extended from their current platform, but the first goal is to get let's say in the next several months that lights up.
To our current customers and then we will start seeing a lot of a lot of usage there Anthony yourself first things first we launched an at work and the second point is pet meds should be getting that up live on our properties in the next three months.
Got it Okay, and then lastly for me so.
Unlike a lot of other consumer companies, where they're dealing with bloated inventories youre actually inventories lower than last year and lower on a sequential basis. So now that being said I mean do you feel like you have adequate inventory.
Of course, it's there still ongoing supply chain issues that we're hearing from other companies. So can you just talk about that as well.
Yeah, Anthony I'll take that question this is Bruce.
As you know our inventory fluctuates from time to time.
Mostly due to opportunistic opportunities as far as buying and if you mentioned in the last call.
The end of the March quarter, we had an opportunity to take on additional inventory to reduce price doing went ahead and pursue the so we definitely were stocked up as of March 31.
And sales, although recovering through the quarter, we're still fairly slow in April so.
I would say inventory levels, where they are right now around 22 23 billion, that's probably a normalized level, maybe a little bit lower than maybe in past seasons, but not so off from where we'd like to be and since we do have direct relationships with the manufacturers lead times were cut.
Really short based on how we used to procure so no concern there we're always going to be opportunistic if theres going to be if we have an opportunity to buy at a reduced cost will take advantage of that and those usually come up usually traditionally at the end of the year. So around 12 31, So we'll see how it shapes up but if there is.
The opportunity will will take advantage of it.
Alright terrific all right. Thank you Bruce and thank you Matt.
You bet. Thanks Anthony.
Yeah.
Yeah.
Thank you our question and answer portion of the call has ended I would now like to turn the call back to Matt Hulett, the company's CEO for concluding remarks.
Thank you operator as you just heard the future of patent that is much more expansive than just a prescription E. Commerce company. We are building our strategy and working hard to transform into a broader e-commerce and subscription brand that reflects and leverages our status as a trusted pet health expert.
I will continue to detail our progress and look forward to providing you with updates in the not too distant future as always thank you to all of our employees customers partners suppliers and investors for your continued confidence and support. Thank you for listening and operator. This ends the conference call.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Yes.