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Petmed Express - $PETS - Earnings Analysis: Improvement in Adjusted EBITDA.

By sagebytes in Business —

Business Model

PetMed Express generates revenue through online sales of pet medications (prescription and non-prescription), pet food, supplements, and supplies, marketed directly to consumers via their websites PetMeds.com and PetCareRx.com, customer contact center, and mobile application.

Revenue Sources

  • Reorder sales (85.1% of Q3 2025 revenue)
  • New order sales (11.5% of Q3 2025 revenue)
  • Membership fees (3.5% of Q3 2025 revenue)

Income Statement Analysis

  • Net sales decreased by 18.9% due to a strategic reduction in gross advertising as we rebalance for profitability.

Balance Sheet Analysis

  • Cash and cash equivalents decreased by 9.4% from March 31, 2024, to December 31, 2024.

Cash Flow Analysis

  • Net cash used in operating activities decreased due to the $7.8 million increase in net income reduced by $12.1 million of non-cash operating adjustments and partially offset by the $4.8 million increase in current liabilities net of current assets excluding cash.

Capital Allocation

The Board of Directors elected to suspend the quarterly dividend indefinitely. This action was intended to focus use of the Company’s existing cash and cash flow on growth initiatives and other, higher return initiatives. The declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors.

Management Commentary

We achieved $2 million in Adjusted EBITDA, a $1.1 million improvement year-over-year, while successfully reducing G&A expenses by $2.6 million compared to last year.

We are committed to pet health and wellness through product differentiation and best in class customer service.

With real time insights, we made the strategic decision to prioritize margin protection over aggressive promotions, ending the quarter with $2,800,000 less in gross advertising spend year over year.

As a result, our sales and new customer acquisition during that period fell short of initial expectations.

Overall Sentiment: The overall sentiment is cautiously optimistic. The company is focused on balancing profitability with customer growth and is taking steps to improve its marketing strategies and customer experience.

Recommendation

Rating: Hold

Reason for Rating: A Hold recommendation is given based on the current financial performance, which shows improvement in profitability but a decline in sales. The company's strategic shift to prioritize margin protection and reset its marketing foundation could lead to future growth, but it's too early to determine the long-term impact.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/11/2025, 8:26:32 AM